Circle, the issuer of the USDC stablecoin, has announced that it will take responsibility for any shortfall caused by the collapse of Silicon Valley Bank.
In a blog post, Circle stated that it has a legal obligation to “stand behind” USDC and will use corporate resources and external capital if necessary to ensure that the stablecoin can be redeemed at a ratio of 1 for 1 with the U.S. dollar. The CEO of Circle, Jeremy Allaire, reiterated this commitment in a Twitter thread.
The move follows a bank run on Silicon Valley Bank that saw USDC lose its peg to the U.S. dollar. It was later disclosed that $3.3 billion of USDC’s cash reserves were held by the bank, which had been taken over by the FDIC.
As a result, USDC fell to $0.87, its lowest point since 2019, before recovering ground to trade at $0.95, according to CoinGecko.
Circle has said that USDC is currently 77% collateralized with U.S. Treasury Bills, while the remaining 23%, or around $9.7 billion, is held in cash.
The company has also deposited $5.4 billion with BNY Mellon to reduce bank risk, while Consumer Bank holds another $1 billion in USDC reserves. Circle maintains transaction and settlement accounts for USDC with Signature Bank.
The announcement by Circle is likely to reassure investors and users of the USDC stablecoin, which has become increasingly popular in the world of cryptocurrency. With Circle committing to cover any shortfall caused by the collapse of Silicon Valley Bank, USDC holders can be confident that they will not be left out of pocket.