There is a lot at stake in the financial sector that is associated with the insolvency of SVB. One of the largest stablecoin entities in the cryptocurrency market, named Circle, has been reported to have major stakes reserved with SVB.
Circle revealed that $3 billion out of a total of $40 billion fiat reserves that were used to back the USDC total supply were under the custody of SVB. The demise of the bank resulted in the breaking of the peg for the USDC stablecoin.
Circle attempted to contain the de-pegging of its stablecoin by burning a considerable number of its token supply. However, the firm also minted new stablecoins. The depositors of SVB had no hope of getting a bail-out from the US government.
However, the Biden Administration has decided to step in and offers a return on all the deposits that were present in SVB. This measure by the US government is taken to stop the banking crisis.
SVB was wrapped up within 48 hours, transitioning from a healthy and profitable bank to getting locked by the regulators. However, considering the critical situation of the US banking sector, the government has ruled in favor of returning the deposits reserved in SVB for every stakeholder.
Speaking on the matter, Circle CEO Jeremy Allaire informed the users in the latest tweet that the company was grateful for the preventive measures adopted by the Federal Reserve.
He mentioned that the project appreciates the efforts made by the US government and Central Bank to offset the negative impact of the risks posed by SVB.
He further informed that by the decree of government policies, Circle would be able to recover 100% of its reserved funds. He mentioned that these reserves would become accessible to the stablecoin entity within 24 hours.
Circle CEO Picks BNY Mellon as Its Next Banking Partner to Restore the Faith of Crypto Investors
Addressing the USDC stakeholders, Allaire tweeted that as soon as Circle recovers $3 billion from SVB, it will start working with BNY Mellon.
He mentioned that the firm is working on creating a robust and automated settlement system for USDC in addition to securing reserve back-ups. The emergency measures announced by the US government are introduced with the corporation of agencies such as FDIC, the Federal Reserve, and the Treasury Department.
This emergency measure dictates that all the depositors of SVB are going to have full access to their 100% reserves on March 13th. Federal Reserve has also announced additional payouts for other depository institutions that are currently undergoing financial turbulence.
To this end, Fed has set up a $25 billion Bank Term Funding Program that will offer loans to struggling banking enterprises for one year term.