USDC stablecoin issuer Circle on Friday confirmed its exposure to the collapsed U.K.-based financial institution, Silicon Valley Bank (SVB). The USDC issuer confirmed through a tweet that it has $3.3 billion stuck in the collapsed bank. The funds stuck in the bank account for over 7% of Circle’s total revenue.

“Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the $40 billion of USDC reserves remains at SVB,” Circle tweeted on its official handle.

The aftermath of the news resulted in Circle’s stablecoin, $USDC, depegging from the USD peg. $USDC is trading at $0.95 as of the time of the report.

Circle was quick to escape Silvergate Bank’s liquidation earlier in the week. However, the second-largest stablecoin issuer was caught in SVB’s collapse.

Massive Exodus Preceding Circle’s Exposure

Following the news of the Circle’s exposure to Silicon Valley Bank, investors flooded in withdrawal requests, taking out billions of $USDC on Friday. Analysis from ScopeProtocol shows that in the last 24 hours, investors have withdrawn over $7.66 billion worth of USDC from centralized exchanges in the last 24 hours.

The analysis also shows that over $2.4 billion USDC has been burned in the last 24 hours. Jump alone cashed out $150 million USDC, while Wintermute and Falcon X moved their USDC holdings to Coinbase.

The massive withdrawal led to $USDC depegging from its dollar peg due to a huge imbalance. USDT’s depeg has inflicted losses on heavy Circle’s stablecoin holders. Voyager is the top holder of USDC with $529 million in the stablecoin. Stablecoin USDC’s depeg means Voyager is on an unrealized loss of $31 million.

Another TerraUST?

Almost a year after Terra’s UST depegged from  U.S. dollars, a repeat of it looks on course. Despite Terra’s effort to take UST back to its dollar peg, it went as low as $0.6.

Circle’s depeg fiasco may not be similar to that of Terra after all. Circle boasts a healthy reserve and will be able to source funds to close the gap in its reserve. 

“Circle is currently protecting USDC from a black swan failure in the U.S. banking system. SVB is a critical bank in the U.S. economy, and its failurewithout a Federal rescue planwill have broader implications for business, banking, and entrepreneurs,” Circle’s chief strategy officer, Dante Disparte, tweeted.

Elendu Benedict

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