On Friday, the second-largest bank collapse in American history occurred, leaving market participants worried about which firms might be caught up in the contagion surrounding Silicon Valley Bank (SVB). This has had a direct effect on the crypto community, as USDC, the second largest stablecoin and the one issued by Circle, has lost its peg across numerous exchanges.
Circle has stated that the company continues operating as normal, despite the fact that 25% of their cash reserves are at SVB – around $3.3 billion. As of late January, Circle’s cash reserves lied with U.S.-regulated financial institutions, including Signature Bank, Silicon Valley Bank, and Silvergate Bank. However, Silvergate Bank has already entered voluntary liquidation this week, and Signature Bank has been down 22% on Friday amid banking concerns surrounding SVB.
Tether CTO Paolo Ardoino has confirmed that his company has no exposure to SVB, and Binance CEO Changpeng Zhao has also confirmed that his company has no exposure to the bank. Market participants appear to be dumping USDC and DAI for Tether’s USDT in DeFi protocol Curve’s 3pool, which Ardoinio called a “flight to safety” over Twitter.
Overall, the crypto community is keeping a close eye on Circle in the aftermath of the SVB collapse, as the company has a significant portion of its reserves held with various banking partners. While Circle has not yet released a statement specifying exactly what portion of its reserves are held with each specific banking partner, they have confirmed that BNY Mellon is a “primary custodian” of USDC reserves. For now, Tether’s stablecoin dominance remains high at 53.3%.