The stablecoin USDC has almost reached parity with the US dollar again, after rising just above $0.99 on March 12, 2023 at 7:20 PM Eastern Time. The stablecoin jumped back to the $0.99 range after the US Federal Reserve announced it would bail out depositors from Silicon Valley Bank (SVB) in California and Signature Bank in New York. Following the Fed’s announcement, Circle CEO Jeremy Allaire said on Twitter that the company would rely on BNY Mellon to handle the minting and redemption process.
Bank closing signature forces Circle to rely on BNY Mellon for USDC Minting and Redemption Settlements
At 8:45 PM Eastern Time on Sunday, March 12, 2023, the stablecoin usd coin (USDC) is trading at $0.998 per unit after jumping above the $0.99 range around 7:20 PM, three minutes after the stablecoin returned to the $0.99 region, Circle CEO Jeremy Allaire tweeted that USDC’s activities would resume on Monday.
The announcement follows the US Federal Reserve’s revelation that it has created a backstop entity called the Bank Term Funding Program (BTFP) to help banks facing liquidity problems. The United States central bank also stated that all depositors of Silicon Valley Bank (SVB) and Signature Bank would be fully compensated.
This means Circle Financial won’t lose money as the bailout will make savers healthy, but Circle will lose a banking partner as Signature is shut down by New York regulators.
“We were encouraged to see critical steps taken by the U.S. government and financial regulators to mitigate the risks posed by the fractional banking system,” Allaire said in a statement. “All SVB deposits are 100% safe and available tomorrow at Banking Open.”
100% of USDC reserves are also safe and we will complete our transfer before [the] remaining SVB cash to BNY Mellon. As previously shared, USDC liquidity operations are resuming [as] banking open[s] tomorrow morning.
Circle’s CEO also commented on the Signature Bank matter, as Circle had previously used the company’s Signet service, which facilitated settlements between USDC and USD. Signature Bank’s Signet is a similar service to Silvergate Bank’s now-defunct SEN network. “With the closure of Signature Bank announced tonight, we are no longer able to process minting and redemption through Signet. We will rely on settlements through BNY Mellon,” Allaire said in his Twitter statement.
In addition to USDC, several other top stablecoins, including DAI, USDD, USDP, GUSD, LUSD, and FRAX, also returned to the $0.99 range after depegging over the weekend. As of March 12, the stablecoin economy is valued at $135.85 billion, reflecting market confidence boosting stablecoin values. Furthermore, stablecoins currently account for the majority of global trading volume, with $71.78 billion of the day’s $88.82 billion in crypto swaps.
What do you think of the USDC almost regaining its parity with the US dollar following the Fed’s announcement? Share your thoughts in the comments below.
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