Starting from Monday, Circle Internet Financial will resume its regular USDC liquidity operations, allowing for the redemption of the unstable stablecoin at a 1:1 rate with the US dollar. The decision comes after the company came up with a plan to use its own “corporate resources” to compensate for any shortage in reserves caused by the unexpected closure of Silicon Valley Bank (SVB).
Circle Ensures USDC Will Maintain 1-to-1 Redemption with the U.S. Dollar
Circle has announced plans to use its own corporate funds, along with external capital, to address the gap in reserves resulting from the recent closure of Silicon Valley Bank. Last Friday, Circle revealed that $3.3 billion in cash reserves supporting the US Dollar Coin (USDC) stablecoin were trapped at the now-defunct bank. While the company is hopeful that the Federal Deposit Insurance Corporation (FDIC) will find a buyer for SVB and compensate all depositors, Circle has pledged to cover any shortfall in the reserves using its own resources and potentially seeking external funding if necessary.
Circle Attempted to Transfer Assets Prior to Silicon Valley Bank’s Collapse
According to Circle, it attempted to transfer its assets from Silicon Valley Bank to its other banking partners just before the bank closed its doors. The transaction is expected to settle on Monday when regular operations at US banks resume. Silicon Valley Bank was a favored bank for many venture-backed technology startups before it was abruptly shut down by California’s financial regulator on Friday. This follows the recent winding down of operations by Silvergate, a crypto-friendly bank headquartered in California. Although Silvergate had closer ties to the crypto industry than Silicon Valley Bank, members of the crypto community were surprised to learn that Circle was affected by the bank’s sudden closure. As a result, Coinbase and Binance have temporarily suspended USDC conversions until banking operations resume on Monday.