USDC stablecoin loses parity with the dollar due to Silicon Valley Bank exposure
The stablecoin USDC lost its parity with the dollar on Saturday, after its issuer, the US company Circle, announced that it has almost 8% of its reserves held in Silicon Valley Bank (SVB). USDC, one of the most important stablecoins backed by US dollars, traded at a minimum of 87 cents, losing the parity with the $1 for which it is designed, The Wall Street Journal reported.
The move came hours after Circle stated via Twitter that it has 25% of its cash reserves spread across six banks, one of them being SVB, which collapsed on Friday and had to be taken over by US regulators. Circle said it had started removing its reserves from SVB on Thursday, but as of yesterday had not recovered around $3.3 billion out of the $40,000 it held, around 8% of the total.
These issues led to two major trading platforms taking action: Coinbase announced it was pausing conversions of USDC to US dollars over the weekend due to the high volume of requests, while Binance temporarily suspended automatic conversions of USDC to its own token, Binance USD. Another stablecoin partially backed by USDC, Dai, also lost its parity with the dollar, dropping to 90 cents on Saturday, according to the Journal.
The collapse of SVB, the largest US bank failure since the 2008 financial crisis and one of the most significant in history, prompted investors to seek safe assets and caused clear declines in the stock market for the second day in a row.