By Mar. 11, USDC, a stablecoin, de-pegged, falling to as low as $0.89 during the Asian session, trackers reveal.
USDC de-pegs after Silicon Valley Bank folds
The de-pegging of the USDC, theoretically meant to track the value of the USD, regardless of market volatility, is why Jesse Powell, the co-founder and CEO of Kraken, is wondering if the broader market is beginning to lose faith in United States-based products.
With USDC under pressure and users scrambling to exit to other mainstream stablecoins, USDT broke its peg with USDC.
Earlier today, USDT traded at a premium versus USDC, reaching as high as 1.08 USDC.
At that time, the USDC had sunk to as low as $0.89 versus the greenback. The peg recovered, reaching $0.96 as of writing on Mar. 11 but is still below the ideal $1.
Several contributing factors made the USDC de-peg. The main one was news that Circle had exposure to Silicon Valley Bank (SVB). Circle shared a tweet earlier today saying it had $3.3b stuck at SVB. This amount represented roughly 8% of their total reserves of approximately $40b.
SVB collapsed after it failed to raise funds, triggering a bank run and a liquidity crisis. It has since been placed under the United States Federal Deposit Insurance Corporation (FDIC).
The agency will now liquidate the bank’s assets and reimburse them to clients, including depositors and creditors.
Stablecoin is fully backed
USDC is issued by Center, a consortium that’s founded by, among other entities, Circle.
Circle claims to be a fully regulated Fintech “re-imagining finance.” Headquartered in the United States, Center, the issuer, is regulated and complies with laid-down rules.
As part of their transparency efforts and to reassure token holders, the issuer issues audited reports and monthly attestations.
Audited reports confirming whether USDC coins are fully backed are audited by the United States Securities and Exchange Commission (SEC). Meanwhile, attestation reports comply with standards the American Institute of Certified Public Accountants (AICPA) sets.
The latest report showed that there are 43,480,317,534 USDC in circulation as of Jan. 17, with a fair value of $43,527,811,961, meaning the token was sufficiently backed.