USD Coin value falls after revealing $3.3bn held at Silicon Valley Bank

theguardian.com:

The value of the world’s fifth-biggest cryptocurrency, USD Coin (USDC), slumped to an all-time low on Saturday after Circle, the US firm behind the coin, revealed that $3.3bn of the reserves backing it were held at Silicon Valley Bank.

USDC is a stablecoin – cryptocurrencies designed to maintain a stable value – USDC’s value is supposed to mimic the dollar. But the coin broke its 1:1 dollar peg and fell as low as $0.87 on Saturday morning.

Circle announced on Friday that $3.3bn of its $40bn of USDC reserves are held at collapsed lender Silicon Valley Bank.

Silicon Valley Bank collapsed on Friday in the largest US bank failure since the 2008 financial crisis, roiling global markets and stranding billions of dollars belonging to companies and investors.

Queues formed out side SVB’s branches as worried depositors rushed to withdraw funds beyond the $250,000 guaranteed by federal banking regulations.

It was later reported that SVB did not have a chief risk officer in place in the months leading up to the collapse, while more than 90% of its more than $212bn in deposits were not insured.

For now, concerns about contagion to other areas of the financial system appeared limited to crypto-currencies early Saturday.

But SVB, based in Santa Clara, California, holds deposits of about one tenth the size of JPMorgan, the largest US bank. It abruptly collapsed after failing to raise money to meet withdrawal demand after saying it had sold about $21bn of securities from its portfolio, resulting in a $1.8bn loss for the first quarter.

Bloomberg estimated that SVB does business with almost half of all US venture capital-backed startups, and 44% of US venture-backed technology and healthcare companies that went public last year.

Those businesses,