Circle Rescues Stablecoin USDC As Its Peg To Dollar Sinks

Stablecoin USD Coin (USDC) lost its dollar peg and slumped to an all-time low on Saturday, Mar. 11, 2023, before recovering most of its losses after Circle, the firm behind it, assured investors it would honor the peg despite exposure to failed Silicon Valley Bank (SVB), Elizabeth Howcroft and Rishabh Jaiwal reported for Reuters.

Photo Insert: The coin, which broke its 1:1 dollar peg and fell as low as $0.88 shortly after 0800 GMT (3 a.m. EST) on Saturday, according to market tracker CoinGecko, recovered to trade around $0.97 by 2100 GMT.

Circle said in a tweet on Friday it has $3.3 billion of its $40 billion of USDC reserves at SVB.

The cryptocurrency firm said in a post that USDC liquidity operations will resume as normal when banks open on Monday morning in the US.

"As a regulated payment token, USDC will remain redeemable 1 for 1 with the US Dollar," it stressed in a blog post. Joseph Edwards, investment advisor at Enigma Securities, said the situation was "extremely serious" for USDC.

"No matter how sound Circle's operations are, this sort of depeg on a stablecoin tends to fundamentally undermine confidence in it," Edwards said.

"The short-term implications here are dramatic and unknowable, especially once systems start to have to be adjusted to the reality that 1 USDC isn't trading at 1 USD for the time being."

The cryptocurrency firm said that in the event the bank does not return 100% of deposits, it will cover any shortfall using corporate resources, involving external capital if necessary.

The coin, which broke its 1:1 dollar peg and fell as low as $0.88 shortly after 0800 GMT (3 a.m. EST) on Saturday, according to market tracker CoinGecko, recovered to trade around $0.97 by 2100 GMT.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic