USD Coin is listed as the second largest “stable” currency worldwide.
New York:
The supposedly “stable” cryptocurrency USDC fell sharply after the firm that created it, Circle, announced a $3.3 billion failure at Silicon Valley Bank (SVB) and dropped its peg to the dollar. .
Circle said late on Friday night it was unable to withdraw its reserves from SVB, whose sudden collapse sent shockwaves through financial markets.
The Federal Deposit Insurance Corporation on Friday acquired major tech lender SVB in the second largest bank failure in US history.
SVB is expected to reopen on Monday under a new name, with billions of customer deposits now under FDIC control.
The FDIC guarantees deposits – but only up to $250,000 per customer and per bank.
The agency said Friday it would provide certificates to customers with uninsured funds — those above the $250,000 limit — so they would be the first to receive the money when the bank is in receivership.
But the process of liquidating the bank’s assets could be lengthy, with no certainty as to how much will be recovered.
USD Coin, or USDC, was launched in 2018 as a “stablecoin,” meaning it was indexed to a currency backed by a central bank, in this case the US dollar.
It is listed as the second largest “stable” currency worldwide based on its volume (about $40 billion) in circulation behind Tether.
Stablecoins are considered to be backed by equivalent reserves in readily available assets, either cash or readily convertible financial securities.
On the night of Friday into Saturday, USDC fell to its lowest level ever, falling as low as 87 cents before recovering to around 94 cents.
Other stablecoins have also suffered.
Dai, the fourth largest stablecoin by volume in circulation, fell to 95 cents, while forex (the sixth largest) fell to 94 cents, its lowest ever.
Cryptocurrency exchange platform Coinbase said it was suspending USDC-dollar conversions until Monday, given its exceptionally high activity.
More than $25 billion in USDC was exchanged on the Coinbase platform in 24 hours, a volume far greater than the overall holdings.
Meanwhile, Binance, the largest cryptocurrency trading site, said it is suspending conversion of USDC to BSD — Binance USD, the platform’s own “stable” currency.
In a statement, Circle said, “Like other customers and depositors who rely on SVB for banking services, Circle calls for the continuity of this important bank in the US economy and will follow the guidance provided by state and federal regulators.” “
Withdrawal orders from SVBs reached $42 billion in a single day on Thursday, according to the California Department of Financial Protection and Innovation.
When the bank was unable to honor all those requests, the FDIC stepped in to take control.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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