Circle managed to move reserves of USD Coin (USDC) stablecoin out of collapsing banking heavyweight
U.S. fintech major Circle, issuer and operator of the second-largest stablecoin USD Coin (USDC), informs its customers about the effects of the Silvergate crisis. As its major instrument Silvergate’s Exchange Network (SEN) is suspended, Circle switches to alternative service providers.
Circle moves deposits out of Silvergate
Today, on March 4, 2023, the Circle team shared an official statement regarding its interaction with Silvergate, a crucial bank for cryptocurrency services, that now faces big troubles.
1/ Tonight, Silvergate discontinued the Silvergate Exchange Network (SEN). This service had automated USDC access for a small number of Circle customers. USDC minting and redemption remains fully operational.
— Circle (@circle) March 4, 2023
As per the statement, Circle has withdrawn the “small percentage” of USD Coin (USDC) reserves held at Silvergate to other banking partners. Circle highlighted that Silvergate and its affiliated services were used by a small number of USDC customers.
Circle also revealed for the first time that it started “winding down” its interaction with Silvergate back in 2022 as signals of “troubles and risks” became apparent.
All elements of the Circle ecosystem are already notified about the status changes of deposits that were previously operated by Silvergate. Meanwhile, Circle highlighted that the bank in trouble continues to assure that no customer deposits are affected by the potential liquidity crisis.
As covered by U.Today previously, Silvergate postponed its quarterly report and announced that it will be reviewing its books with auditors. This caused panic on the markets: Silvergate stocks (NYSE: SI) lost over 50% in no time.
Another domino effect in crypto?
As Silvergate is a critical element of the global crypto-to-fiat remittances system, its potential collapse pushed Bitcoin (BTC) to three-weeks low. Over $210.14 million in crypto derivatives positions were liquidated yesterday, with 97% of them being longs.
Crypto heavyweights Coinbase, Bitstamp, Circle and Paxos have already announced that they are ceasing all collaboration with Silvergate to protect users’ funds.
However, due to unmatched volatility, crypto markets are vulnerable to such “domino effects” triggered by bank runs.
For instance, the Terra (LUNA) ecosystem collapse resulted in insolvency of crypto lenders Voyager and Celsius as well as asset management firm Three Arrows Capital.
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