After USDC was unpegged from $1 last week, many in the crypto industry are wondering whether the collapse of Silicon Valley Bank will have a significant impact on the stablecoin ecosystem.
Stablecoin USDC, which appears to be stable, lifted its peg on Friday and plunged to 88 cents on Saturday due to uncertainty over the $40 billion USDC empire, the second-largest stablecoin by market capitalization. Did. USDC issuer Circle shared that his $3.3 billion, or about 8.2%, of USDC’s total reserves are held in his SVB. The Circle later announced that the readiness risk had been “removed” as funds became available on Monday morning.
Reserve co-founder and CEO Nevin Freeman said the USDC depeg over the weekend revealed serious flaws in the design of existing fiat-backed stablecoins.
“If any of the banks on which the issuer of the stablecoin depends fails without bailout and the issuer is unable to fill the void with its own capital or new capital injections, the bank mounting on the stablecoin will There will be a ruckus and they will be pulled out of the bank or the issuer will have to shut down and go bankrupt to prevent such execution,” Freeman told TechCrunch+. It’s not the issuer’s fault of the tablecoin, they have no choice but to rely on fractional reserve banks when it comes to providing liquidity to their users.”
Over the weekend, USDC prices acted as a live prediction market for whether SVB depositors will be perfect, Freeman said. The stablecoin rose from 97 cents to 99 cents shortly after the Federal Deposit Insurance Corporation and the U.S. Federal Reserve Board announced they were making depositors perfect, and he was the first bank to open and actually start operating. It has recovered to $1, he noted.
SVB chaos could be a problem for stablecoins
