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While there has been much talk of a crypto crackdown in the US, one of the biggest, if not the biggest, beneficiaries of Silicon Valley Bank’s recent depositor backstop was actually the crypto corporate circle.
Circle held $3 billion in reserves backing the USDC stablecoin in SVB. Let me remind you that the FDIC insurance limit is $250,000, so a circle that claims to be “leading a more responsible and stable future for cryptocurrencies” has exceeded that limit by just 12,000 times. .
Two weeks later, Circle co-founder and CEO Jeremy Allaire asks us to pay attention to the themes of risk management, regulatory oversight, and the systemic value of technology ecosystems.
6/ Never in the past decade have we seen a more urgent need for clear, consistent, and pragmatic policies. We are at significant risk of the entire strategic technology sector moving away from U.S. leadership. @congressdotgov @WhiteHouse
— Jeremy Allaire – jda.eth / jdallaire.sol (@jerallaire) March 23, 2023
The weekend that SVB went bankrupt, USDC broke ground. The secondary market price returned to $1 for Bungie after the US government announced depositor protection for SVB.
Semantics aside, Circle was effectively receiving a $3 billion bailout from U.S. taxpayers.
Two weeks later, Allaire shares his thoughts on honesty, transparency, and trustworthiness.
8/ USDC is tireless and has never failed to mint USDC or redeem $1, including during stress tests over the past few weeks. As of last week, over the past year, it had redeemed $192.4 billion of USDC at $1 and issued $176.9 billion at $1.
— Jeremy Allaire – jda.eth / jdallaire.sol (@jerallaire) March 23, 2023
Allaire gave the opening keynote speech at Paris Blockchain Week on Thursday, in which he discussed the “inherent risks associated with fractional reserves that plagued the financial system in booms and busts” during the global financial crisis. He talked about how cryptocurrencies were invented to avoid this.
Here’s the taster:
Today we are witnessing once again the limitations of this fractional reserve banking system. Failure of Silicon Valley Bank. Credit Suisse bankruptcy. Failure of First Republic Bank. And because of all the inherent risks in today’s fractional reserve banking, backstops are being put in place by central banks around the world as we speak. This is the financial system we are in today, and the world it was in over a decade ago, when cryptocurrencies emerged to accommodate this.
… right. So perhaps Circle will get a bailout from tradfi and rely solely on cash equivalents?
no. 80% of USDC’s reserves are still held in bond funds managed by BlackRock. Elsewhere, Circle is moving “to a stronger banking infrastructure,” Allaire said. All of USDC’s cash backing is currently deposited with “one of the world’s largest global systemically important banks with the world’s lowest credit risk and the world’s most secure cash instruments.” . So today, USDC is literally the safest digital dollar on the internet. ”
A week may be a long time in the world of politics, but in the world of cryptocurrencies, two weeks can feel like an eternity.
