Considered “stable” because it is theoretically pegged to the dollar, the USDC cryptocurrency was under fire overnight from Friday to Saturday after its creator Circle announced that it had left $3.3 billion in the treasury of bankrupt SVB bank. Circle announced that it was unable to withdraw all of its deposits from Silicon Valley Bank (SVB), a failed California bank. On Friday, the American Deposit Guarantee Agency (FDIC) took control of the facility, which is due to reopen on Monday under a new name. Circle said on its Twitter account that its $3.3 billion worth of assets are still in the SVB’s treasury, although not available.
FIDC only guarantees deposits up to $250,000 per customer at each bank. On Friday, he said he would issue a certificate to SVB savers whose assets exceed that amount. Reimbursement of all or part of deposits over $250,000 would be contingent on the liquidation of the bank’s assets, a process that is often lengthy and with uncertain results, she said.
Launched in 2018, the USD Coin or USDC is a “stablecoin”, i.e. a digital currency pegged to a currency created by a central bank, in this case the US dollar. It is the second so-called “stable” digital currency in terms of circulation volume (about $40 billion) after Tether and the fourth cryptocurrency in the world by the same criterion. It is assumed that stablecoins should be backed by equivalent reserves of assets that can be immediately mobilized, mostly in cash or easily traded financial securities.
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Overnight from Friday to Saturday, USDC’s value fell to its lowest level since its inception, around 94 cents, according to multiple trading venues, when it is expected to remain pegged to parity with the dollar. The impulse swept through other stablecoins. The dai, the fourth stable currency in circulation, also fell to 94 cents, while the frax (6th) fell to 93 cents, the most in its history. Cryptocurrency exchange platform Coinbase has announced the suspension of USDC to USD conversions until Monday due to exceptional activity in this asset.
According to data published by Coinbase, more than $16 billion worth of USDC has been traded in the last 24 hours, which is a whopping volume compared to the amounts held in this currency. As for Binance, the largest cryptocurrency trading site, it has decided to suspend the conversion of USDC to BUSD or Binance USD, the platform’s “stable” currency. “Like other customers and depositors who depend on SVB for their banking services, Circle joins the calls for the continued business of this important bank to the US economy,” Circle executives wrote.
According to a document released on Friday by the California Department of Consumer Protection Services (DFPI), SVB takedown orders reached $42 billion on Thursday alone. Not all of them could be met as the bank ran out of cash, causing it to be turned over to the FDIC.
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