A number of US banks, including Silvergate, Silicon Valley Bank, and Bank of New York Mellon, hold Circle’s reserves.
According to Circle’s most recent audit report from January, the company’s exposure to the US banking system is close to $9 billion. USD Coin (USDC $0.92) is Circle’s primary product.
The country’s regulated financial institutions, such as Silvergate, Silicon Valley Bank (SVB), and Bank of New York Mellon, are where Circle’s reserves are kept.
The research states that as of January 31, U.S. regulated financial institutions had $8.6 billion in cash, or around 20% of their reserves. A further $33.6 billion of its reserves are kept in US Treasury securities managed by BlackRock through the Circle Reserve Fund, which is officially recognized as a government money market fund and whose assets are held by BNY Mellon.
A Circle spokeswoman clarified the following in a statement:
“Silicon Valley Bank is one of six banking partners Circle uses for managing the approximately 25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of Silicon Valley Bank will impact its depositors, Circle and USDC continue to operate normally.”
Citizens Trust Bank, Consumers Bank, New York Community Bank, a branch of Flagstar Bank, and Signature Bank are additional institutions that hold the company’s reserves.
As of January 31, USDC had a $42 billion circulating supply, making it the second-largest stablecoin. Big Four accounting firm Deloitte evaluated and approved Circle’s January report.
SVB is a significant financier for venture-backed businesses and one of the top lenders in the US. The California Department of Financial Protection and Innovation closed the bank on March 10, which increased worries about its future.
To safeguard insured deposits, the Federal Deposit Insurance Corporation was chosen as the receiver. The country’s numerous startups and tech firms, which are essential for the “sustained growth of the American economy,” are at risk, according to Dave Weisberger, co-founder and CEO of algorithmic trading platform CoinRoutes, who mentioned that “the fodder for a broader contagion event is there” and that “the spark could be materializing.”
Weisberger further stated:
“A good many tech firms — startups but also Big Tech companies — have deep exposure to SVB. If the government doesn’t step in and effectively carry out a bailout of some sort, then we should be expecting these companies to struggle to pay their employees, as well as layoffs and, possibly, rising unemployment.”
The closure of Silvergate Capital Corporation’s cryptocurrency bank unit was announced earlier this week, citing “recent industry and regulatory changes.”
The liquidation plan, according to the business, calls for “full refund of all deposits.” A prominent on-ramp for cryptocurrencies in the United States, Silvergate was a large crypto-fiat gateway network for financial institutions.
Circle vehemently denied having any recent contact with Silvergate. Circle transferred the “minimal percentage of USDC reserve deposits retained,” according to a statement on March 4.
According to previous reports, the United States government is organizing a regulatory assault on banks that provide services to cryptocurrency companies, utilizing a number of agencies to prevent collaboration between established institutions and the new sector.