Circle, the issuer of the USDC stablecoin, reportedly has exposure to the US banking system totaling almost $9 billion. The funds are held in a range of US banks, including Silvergate, Silicon Valley Bank, and Bank of New York Mellon. The company’s January audit report showed that $8.6 billion was held in cash by regulated financial institutions, representing around 20% of Circle’s reserves. Another $33.6 billion was held in US Treasuries managed by BlackRock through the Circle Reserve Fund, registered as a government money market fund, and with funds held by BNY Mellon.
While it is unclear how much of Circle’s cash reserves were held by SVB, other banks holding the company’s reserves include Citizens Trust Bank, Customers Bank, New York Community Bank, a division of Flagstar Bank, and Signature Bank. The USDC stablecoin has a circulating supply of $42 billion as of January 31st, making it the second-largest stablecoin.
Circle’s January report was reviewed and certified by Big Four accounting firm Deloitte. However, the recent shutdown of SVB by the California Department of Financial Protection and Innovation has raised concerns about its future, as it is one of the biggest lenders in the US and a major player for venture-backed companies. The fear is that if the government does not step in and carry out a bailout of some sort, many startups and tech companies in the country may struggle to pay their employees, leading to layoffs and rising unemployment.
Additionally, US authorities are reportedly coordinating a regulatory crackdown on banks serving crypto firms, discouraging the relationship between traditional institutions and the emerging industry. The recent closure of Silvergate Capital Corporation’s crypto bank arm is an example of the challenges faced by crypto-fiat gateway networks for financial institutions in the US.
In conclusion, while Circle’s exposure to the US banking system is significant, it remains to be seen whether any contagion events will occur, given the current regulatory environment and the actions of the US government. Investors and market participants will be watching closely for any signs of further disruption or instability in the US financial system.