The USDC stablecoin has nearly regained parity with the US dollar after rising slightly above $0.99 on March 12, 2023 at 7:20 PM ET. The stablecoin rose back into the $0.99 range after the US Federal Reserve revealed it would bail out depositors at California’s Silicon Valley Bank (SVB) and New York’s Signature Bank. Following the Fed’s announcement, Circle CEO Jeremy Allaire said on Twitter that the company would trust BNY Mellon to sort out the minting and redemption process.
Signature Bank Shutdown Forces Circle to Rely on BNY Mellon for USDC Minting and Redemption Deals
At 8:45 PM ET on Sunday, March 12, 2023, the USD stablecoin coin (USDC) is trading at $0.998 per unit after jumping above the $0.99 range around 7:20 p.m. M. Three minutes after the stablecoin returned to the $0.99 region, Circle CEO Jeremy Allaire tweeted that USDC trading would resume on Monday.
The announcement follows disclosure by the US Federal Reserve that it has established a support entity called the Bank Term Financing Program (BTFP) to help banks facing liquidity challenges. The US central bank also stated that all Silicon Valley Bank (SVB) and Signature Bank depositors would be fully compensated.
This means that Circle Financial will not lose funds because the bailout will make depositors full, but Circle does lose a banking partner with the closure of Signature by New York regulators.
“We were encouraged to see that the US government and financial regulators took crucial steps to mitigate the risks that spread from the fractionalized banking system,” Allaire said in a statement. “All SVB deposits are 100% secure and will be available tomorrow in open banking.”
Allaire aggregate:
100% USDC reserves are also secure and we will complete our transfer for (the) remaining cash from SVB to BNY Mellon. As previously shared, liquidity trading for USDC will resume (when) banking opens tomorrow morning.
Circle’s CEO also commented on Signature Bank’s issue, as Circle had previously used the company’s Signet service, which facilitated settlements between USDC and USD. Signature Bank’s Signet is a service similar to Silvergate Bank’s now-defunct SEN network. “With the closure of Signature Bank announced tonight, we will not be able to process minting and redemption through Signet. We will trust the deals through BNY Mellon,” Allaire said in the Twitter statement from him.
In addition to USDC, several other major stablecoins including DAI, USDD, USDP, GUSD, LUSD, and FRAX also returned to the $0.99 range after falling over the past weekend. As of March 12, the stablecoin economy is valued at $135.85 billion, following market sentiment bolstering stablecoin values. Additionally, stablecoins account for the majority of global trading volume right now, with $71.78 billion of the day’s $88.82 billion in crypto exchanges.
What do you think about the USDC almost regaining its parity with the US dollar after the Fed announcement? Share your thoughts in the comments section below.
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