Circle Reassures Customers Riding on Promises from Federal Regulators

UTC by Benjamin Godfrey · 3 min read
Circle Reassures Customers Riding on Promises from Federal Regulators
Photo: Shutterstock

According to Circle, the bulk of its reserve for the USDC stablecoin is domiciled in US Treasury Bills.

Crypto startup Circle, the issuer of the USD Coin (USDC) stablecoin has announced that the USDC reserve risk being nursed by the firm’s key customers has been removed. As shared in a Press Release published early today, the firm said riding on the joint statement from the US Treasury Secretary Janet Yellen and US prudential regulators, the company will be made whole.

Circle revealed earlier that it has a total deposit worth about $3.3 billion in Silicon Valley Bank, SVB Financial Group (NASDAQ: SIVB), the financial institution whose operations have been forced stopped by regulators in the wake of its bank run last week. Additionally, the crypto-centric bank, Signature Bank (NASDAQ: SBNY) by regulators who noted both companies poses a systemic risk to clients.

With the closure of these banks, the fate of stakeholders becomes uncertain, however, the joint announcement highlighted how the government will not bail out SVB equity holders but will place utmost attention on depositors.

Should this happen, Circle will be able to redeem the $3.3 billion it has in deposit with SVB which represents about 8% of the total USDC Reserve. The company said the locked-up funding with SVB will be available as soon as banking operations resume on Monday morning. The USDC issuer confirmed that its USDC stablecoin is still redeemable on a 1:1 basis with the United States Dollar.

“Trust, safety, and 1:1 redeemability of all USDC in circulation is of paramount importance to Circle, even in the face of bank contagion affecting crypto markets,” said Jeremy Allaire, Co-founder, and CEO of Circle. “We are heartened to see the US government and financial regulators take crucial steps to mitigate risks extending from the banking system. We’ve long advocated for full-reserve digital currency banking that insulates our base layer of internet money and payment systems from fractional reserve banking risk.”

Circle Reveals Reserve Details to Customers

Circle also highlighted how well it is capitalized according to the details of its reserve asset which it shared alongside the release. According to the firm, the bulk of its reserve for the USDC stablecoin is domiciled in US Treasury Bills. Per the figure posted, the T-Bills it owns are worth $32.4 billion making up 77% of its total collateral.

The firm confirmed that the T-Bills are short-dated and as the direct obligations of the US Government, that they are one of the most liquid assets in the world.

USDC is the world’s second-largest stablecoin after the USDT. The stablecoin currently has a market capitalization of $40.56 billion after depegging as low as $0.8774 amid the massive Fear, Uncertainty, and Doubt (FUD) that gripped its ecosystem. At the time of writing, USDC is changing hands at $0.9887 but there is relative calm as Circle is set to resume its operations.

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