OH NO – More Silicon Valley Bank Fallout – Goldman Sachs Backed CIRCLE’s Stable Coin ‘USDC’ No Longer Pegged to Dollar – Conversion to Dollars Halted

CIRCLE crypto company is under additional duress.  Currently, trading of its stablecoin ‘USDC’ has been suspended till at least Monday and the coin is no longer pegged to the dollar. 

On Saturday it was reported that crypto company CIRCLE was at risk from the Silicon Valley Bank failure because CIRCLE had over $3 billion in assets held at the bank.

Oh No! Crypto Company CIRCLE Admits It had a $3.3 Billion Exposure at Silicon Valley Bank

Overnight it’s gotten worse.  CF reported:

The fallout from the failure of Silicon Valley Bank reached further into crypto, unhinging a key cog in the market that’s meant to be among the safest digital assets in the space.

The second-largest stablecoin fell from its intended $1 peg, trading as low as 81.5 cents as investors reacted to the exposure of issuer Circle Internet Financial Ltd. to the collapsed bank.

USD Coin, or USDC, is an asset-backed stablecoin and a widely used plank of crypto markets. The token is intended to hold a constant $1 value, fully backed by reserves of cash and short-dated Treasuries. But late Friday, Circle disclosed that $3.3 billion of its roughly $40 billion stockpile of reserves is held with Silicon Valley Bank, which has just become one of the largest US bank failures in recent history.

Regulators seized the bank on Friday and investors are awaiting more clarity on the return of deposits. In that vacuum, USDC fell below $1, trading at about 91 cents as of 8:45 a.m. in New York. Smaller stablecoins like DAI, which is sometimes viewed as a proxy for USDC, and Pax Dollar also fell from their pegs. DAI is the fourth-largest stablecoin by circulation…

USDC had a circulating supply of around 40 billion tokens as of Saturday morning in New York, CoinGecko data shows. A net $2 billion of USDC was redeemed in the past 24 hours, according to blockchain research firm Nansen. Data compiled by Bloomberg indicated USDC traded as low as 81.5 cents…

As the selloff in USDC worsened on Friday night, US-based crypto exchange Coinbase Global Inc. said it would be “temporarily pausing” the conversion of USDC into US dollars during the weekend, and would resume on Monday when banks open. “Your assets remain safe & available for on-chain sends,” the crypto exchange said in a tweet from an official account.

Goldman Sachs is reportedly behind CIRCLE.  According to Financial Advisor Magazine Goldman Sachs-backed CIRCLE purchased another company for an estimated $400 million back in 2018:

Goldman Sachs-backed cryptocurrency startup Circle has acquired digital token exchange Poloniex, Circle said on Monday, as it aims to cement its position as one of the leading players in the booming market.

Neither of the Boston-based companies disclosed the value of the deal that gives Circle control of a marketplace it said sometimes has daily volumes of more than $2 billion, with around 70 different digital currencies and tokens traded.

Fortune magazine said the deal was worth $400 million, citing a person familiar with the matter.

Other transactions since have identified Goldman Sachs as backing CIRCLE as well.

The Silicon Valley Bank closure is having major reactions in many markets.  We’ll see what’s next. 

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Joe Hoft is a Radio Host at TNTRadio.live, Author, Former International Corporate Executive in Hong Kong for a Decade, and a Contributor at TGP since 2016. Joe is the author of five books, including his new bestseller, "The Steal: Volume II - The Impossible Occurs" which addresses the stolen 2020 Election and provides an inventory of issues that prove that the 2020 Election was uncertifiable and never should have been certified for Joe Biden.

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