USDC Tumbles as Circle Reveals $3.3 Billion Held at SVB, Tether and Binance Not Exposed

Following the second-largest bank collapse in American history on Friday, market participants are worried about which firms might be caught up in the contagion surrounding Silicon Valley Bank (SVB). 

Here’s what venture capitalists and major crypto executives had to say about the failure – and why the crypto community is keeping an eye on Circle in the aftermath. 

USDC, the second largest stablecoin and the one issued by Circle, has lost its peg across numerous exchanges. At the time of this writing, it’s trading at around $0.94, according to data from CoinGeko.

However, it’s important to note that Circle stated that the company continues operating as normal, despite the fact that 25% of their cash reserves are at SVB – around $3.3 billion.

Is Circle in Trouble?

A report stated that as of late January, Circle’s cash reserves lied with U.S.-regulated financial institutions including “Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, a division of Flagstar Bank, N.A., Signature Bank, Silicon Valley Bank, and Silvergate Bank.”

The report claimed that about $9.88 billion are held across all of those institutions, though an updated figure on Circle’s transparency page claimed that number has increased to $11.4 billion. That’s about 26.3% of Circle’s reserves – the rest of which were held in U.S. Treasury Securities. 

Circle’s $42.3 billion in total reserves were only about 0.1% higher than its outstanding debt in the form of tokens, amounting to $42.2 billion. As of March 10 22:00 UST, USDC’s market cap is $42.8 billion – down $900 million from just four hours prior, according to CoinGecko. 

Fun fact guys!#Circle held part of its stablecoin reserves in Signature Bank, Silicon Valley Bank, and Silvergate Bank as of this January.

Signature is down 46% on the month, and SVB / SI have already failed🙃

The company’s reserves are only 0.1% above outstanding tokens… pic.twitter.com/BZHsyOFV9c

— Andrew Throuvalas (@AThrouvalas) March 10, 2023

At writing time, Circle is yet to release a statement specifying exactly what portion of its reserves are held with each specific banking partner. However, Circle announced that BNY Melon was a “primary custodian” of USDC reserves 12 months ago. It also clarified that the small portion of its reserves held at Silvergate – a crypto bank that entered voluntary liquidation this week – have already been moved to other banking partners. 

Another of Circle’s partners, Signature Bank, appears to have been a first-choice alternative for crypto firms distancing themselves from Silvergate. However, even that firm was down 22% on Friday amid widespread banking concerns surrounding SVB. 

Tether and Binance

Tether – the world’s largest stablecoin issuer – does not appear to be under the same stress. When asked over Twitter, Tether CTO Paolo Ardoino said the company had no exposure to SVB.

#Tether has no exposure to Silicon Valley Bank, unlike Circle. https://t.co/wvwpM8K6bi

— Andrew Throuvalas (@AThrouvalas) March 10, 2023

Following SVB’s collapse, market participants appear to be dumping USDC and DAI (a crypto backed-stablecoin largely comprised of USDC reserves) for Tether’s USDT in DeFi protocol Curve’s 3pool. 

Ardoinio called the activity within the pool a “flight to safety” over Twitter.  Tether’s stablecoin dominance remains high at 53.3%, according to DeFi Llama. 

Binance CEO Changpeng Zhao has also confirmed that his company – the world’s largest crypto exchange – has no exposure to Silicon Valley Bank.

#Binance does not have exposure to SVB. Funds are #SAFU.

— CZ 🔶 Binance (@cz_binance) March 10, 2023