23. February 2024

• Circle has pledged to back its stablecoin USDC with corporate resources if required.
• The news was made after the stablecoin temporarily traded for less than its $1 peg on March 11.
• On Friday, the California regulators closed down Silicon Valley Bank, a prominent financial institution for Silicon Valley’s venture investors and entrepreneurs.

Circle Pledges Corporate Resources to USDC

Circle has pledged to back its stablecoin USDC with corporate resources if required. This comes in response to the sudden closure of SVB on March 11th which caused the USDC price to dip below its $1 peg and trade at $0.87 before gradually recovering to trade at $0.95 at the time of writing. Circle aims to make up for any deficit in its reserves by drawing from “corporate resources” if needed and will seek more money from other sources should the need arise.

Silicon Valley Bank Closure

On Friday, California regulators closed down Silicon Valley Bank, a prominent financial institution for Silicon Valley’s venture investors and early-stage entrepreneurs. Many in the crypto world were surprised when they found out that Circle had major exposure to the failed bank, albeit it was not as concerning as Silvergate’s case. To ensure continued exchangeability of USDC, Circle is now relying on Monday’s regular operations at U.S financial institutions in order to conclude their deal and restore trust in USDC trading pairs once again.

USDC Depegged from Initial Price

The news of backing with corporate resources came after USDC temporarily depegged from its initial price of $1 following Circle’s announcement that it held $3 billion worth of assets in Silicon Valley Bank reserves prior to their closure. As a result of this unexpected event, traders became concerned over how this would affect their investments in USDT and other fiat-backed stablecoins like GUSD or PAX which also rely on banking services similar to those provided by SVB. However, with Circle now providing extra support through its own corporate funds, traders are likely feeling a lot more reassured about trading these coins moving forward..

Circle’s Move

By pledging corporate resources as backup for potential cash deficits due to SVB’s closure, Circle is demonstrating that it takes responsibility for protecting users’ investments seriously despite unforeseen circumstances such as this one occurring outside of their control. With no clear indication as yet when SVB might be able to resume operations which would allow them access their funds again; it is reassuring that there is another measure available which can ensure exchangeability between dollars and USDT remains unaffected until then.

Conclusion

Overall, while Circle cannot guarantee total protection against any losses users may suffer due to external events such as this one; they have certainly taken steps towards doing what they can by introducing an additional layer of security through drawing into their “corporate resources” should reserve levels drop too low during times like these where government regulations prevent banks from releasing cash holdings quickly enough or at all until further notice given by authorities