Circle, the American startup behind the world’s second-largest stablecoin, USDC has revealed details about its operation to its community. As revealed in a blog post published on March 14, Circle said it has resumed its regular operations including the redemptions of the USDC stablecoin.
The previous week marked a significant period for Circle as it not only got scared by the failure of the two core banking partners for the crypto ecosystem Silvergate Bank and Signature Bank, it also got its funds tied up on Silicon Valley Bank (SVB), which was closed by regulators in the past week.
The events and the lack of accessibility to the USDC deposits to fulfill redemptions fueled a scary depegging of the stablecoin. For a token that was designed to be pegged 1:1 to the US Dollar, the asset dropped as low as $0.8 last week sending panic to the industry.
The industry is still reeling from the depegging of the TerraUSD (UST) stablecoin which slumped last year in May as its algorithm was tampered with by yet-to-be-named actors. The depegging of UST at the time fueled the collapse of the stablecoin which marked an end to the first iteration of the Terraform Labs dynasty.
The industry was quite impressed with Circle as it was able to stir a swift comeback for the USDC stablecoin following its de-peg. At the time of writing, the stablecoin is now trading at a spot price of $0.9992 atop a market capitalization of $38.4 billion. The swift recovery of USDC can also be attributed in part to the efforts of Center, the coalition of Web3.0 firms including Coinbase Global Inc (NASDAQ: COIN) who are actively supporting the stablecoin ecosystem.
Circle and the New USDC Banking Path
As unveiled by Circle, it has started processing its redemption through a new banking partner after it was able to access the funds worth $3.3 billion locked up in Silicon Valley Bank.
“Since the failures of Signature Bank and Silvergate Bank, our core transaction banking partners, our teams have been working around the clock to restore USDC liquidity operations, including bringing on new transaction banking partners,” the firm’s update reads, “We began processing minting and redemption requests on Monday morning, March 13, when the U.S. banking system re-opened, and are currently working through the backlog.”
According to Circle, the majority of its USDC reserves held in cash are now domiciled with Bank of New York Mellon Corp (NYSE: BK). While it confirmed it is still in search of reliable banking partners, the firm said the majority of its reserve is held in highly liquid investments.
“The majority of the reserve is invested in the Circle Reserve Fund, managed by BlackRock and custodied at BNYM, which is principally comprised of short dated US Treasuries,” it said.
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Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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