Circle, the issuer of the USDC stablecoin, says it cleared “substantially all” redemption backlogs triggered by the collapse of Silicon Valley Bank (SVB).
Trouble for Circle began after it revealed that it held 8% of its $40 billion USDC reserves at collapsed SVB. Consequently, USDC lost its 1:1 dollar peg, falling to as low as $0.87.
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On March 15th, Circle revealed it had redeemed $3.8 billion worth of USDC and minted $0.8 billion. The company added that it was almost done with all redemption requests for the stablecoin.
Circle has been working harder than ever to restore USDC’s liquidity operations. Those efforts include picking new banking partners to process redemption and minting requests. Thus far, it has been a success.
The collapse of the SVB was a major blow for Circle, followed by the downfall of Signature Bank, which handled redemption and minting requests via SigNet. As a remedy, Circle has partnered with Cross River Bank, which offers banking services to Coinbase, to handle minting and redemption requests.
Additionally, Circle has expanded its partnership with the Bank of New York Mellon, the primary custodian of its USDC dollar reserves. Circle has said it will continue working with new partners to restore all functions.
The mad dash to leave USDC caused problems for some holders; one whale paid nearly $2 million as they scrambled to leave and only received $0.05 worth of Tether (USDT).
The USDC dollar de-pegging has exposed a major flaw in stablecoins’ design. The feature is based on the continued trust in the stability of the US financial system.
If more banking partners fail, it could undermine faith in stablecoins, causing interest in them to fall.
by Gile K. – Crypto Analyst, BitDegree
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