After information about Silicon Valley Bank’s closure became public last Friday, the USDC stablecoin lost its value during the last hours of that day. Apparently, holders rushed to cash in their tokens when they learned that part of Circle’s funds were held at Silicon Valley Bank.
The first few moments were ones of anticipation for users. However, after falling below a dollar, the stablecoin regained its parity thanks to federal banking and financial regulators declaring that all SVB depositors would be compensated, and that they would have full access to their funds.
Just a few hours later, Circle acknowledged that about 8% of its total funds were in Silicon Valley Bank. The Federal Deposit Insurance Corporation (FDIC), however, announced that all insured SVB users would regain access to their funds this Monday.
However, all those who are not insured would only get an advance. It’s important to note that more than 90% of the funds in the SVB were uninsured.
The world’s second largest stablecoin, USDC, fell as low as US $0.86 on some passages, but began to regain its value during midday on Saturday.
For its part, Circle assured investors that it would “cover any shortfall” in USDC reserves using corporate funds should it fail to recover the full US$3.3 billion, something that helped its rally to US$0.97.
The announcement came after several major cryptocurrency exchanges suspended or paused USDC-related transactions. Coinbase (COIN), the leading U.S. exchange, paused USDC to U.S. dollar conversions late Friday.
Meanwhile, the world’s largest exchange, Binance, announced on Saturday that it would resume trading in certain USDC pairs that it had previously suspended.