Circle’s USDC is almost regaining its full value after declining 14% over the weekend. Data from CoinGecko shows the stablecoin is trading at $0.99 as of this writing.
Recent development signals that some investors are still confident in Circle. On Monday, an unidentified investor deposited over $400 million into their Circle account, and minutes later, blockchain data firm Nansen reported that Circle had minted USDC equivalent to the deposited funds.
Martin Lee, Nansen data journalist, said the firm has yet to identify the investor. Further, Lee reported 233.4 million USDC tokens were transferred to crypto exchange Coinbase two hours after the mint.
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The journalist believes Circle will solve the problems that it is currently facing without any major negative financial implications. But he warns of the fragility of traditional banking system that maintains the cash reserves backing the USDC stablecoin.
Circle’s Ties to Silicon Valley Bank
On Friday, when Circle revealed it kept about $3.4 billion in cash reserves of its stablecoin in the now-fallen Silicon Valley Bank, USDC, which is usually redeemable 1:1 with US Dollar, declined to 0.88%, its lowest price since 2019.
However, the stablecoin issuer’s exposure to Silicon Valley Bank only accounts for roughly 7% of the total $42.2 billion in cash reserves backing USDC.
Over the weekend, Circle vowed to cover the deficit through corporate resources or even external capital if need be.
UK and US Regulators Help USDC Recapture Lost Grounds
On Monday, USDC had almost recovered all the losses, thanks to the US regulators, who issued a joint statement promising to ensure that all Silicon Valley Bank depositors would be made whole.
The joint statement, which came from US Treasury Secretary Janet Yellen, Federal Deposit Insurance Corporation Chair Martin Gruenberg, and the US Federal Reserve boss Jerome Powell, also insisted that US taxpayers won’t bear any losses in regard to the bank’s closure.
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Further, the United Kingdom Ministry of Finance facilitated a bailout deal that saw HSBC purchase the Silicon Valley Bank British entity for $1.21 in an effort to make whole UK companies affected by the bank’s collapse.