Summary
- The collapse of Silicon Valley Bank (SVB) has caused concern for investors using stablecoins such as USDC and USDT.
- Circle, the company behind USDC, had $3.3 billion or 8% of its reserves at SVB before its collapse.
- Tether’s USDT also faces concerns about exposure to the financial sector, with most of its reserves in cash and cash equivalents.
USDC and SVB
The collapse of Silicon Valley Bank (SVB) has caused worry in the crypto industry, especially for investors who use stablecoins like USDC and USDT. Circle, the company behind USDC, had $3.3 billion or 8% of its reserves at Silicon Valley Bank (SVB) before its collapse. Now, Circle is facing a high number of people withdrawing their funds, causing the value of USDC to decrease. As a result, some exchanges like Coinbase and Binance have suspended certain transactions involving USDC. However, Circle still has access to other banking partners and most of its USDC reserves are invested in short-term US treasuries and US banks. Despite these challenges, Circle is actively working to maintain the stability of USDC.
USDT and the Financial Sector
Tether’s USDT stablecoin also faces concerns about exposure to the financial sector. With the collapse of banks like Silvergate Capital, investors are concerned about the stability of USDT and other stablecoins that are usually backed by fiat currencies held in these banks.#tether doesn’t have any exposure to SVB— Paolo Ardoino 🍐 (@paoloardoino) March 10, 2023 USDT was originally created as a way to allow cryptocurrency traders to use a stable asset for trading and arbitrage purposes without needing to convert back and forth between cryptocurrencies and fiat currencies like the US dollar.
USDT is audited by BDO which is one of the biggest audit companies in world; Its financial statements show that most of its reserves are in cash equivalents including U$ treasury bills , Money Market Funds And Cash In Banks . The Latter Represent About 9 .66 % Or About $ 6 .8 Billion Of Tether’s Reserves , Which Can Cover Significant Outflows .
Stablecoin Safety Measures
Both Circle and Tether have taken measures to ensure safety for their respective Stable coins . Circles Cash Reserves Are Stored At The Bank Of New York Mellon Where They Have Taken Steps To Ensure Security ; Similarly , Tether Has Also Put In Place Security Measures To Protect Its Reserves From Unauthorized Access Or Thefts ; Furthermore , It Is Regularly Audited By A Third Party Auditor To Ensure That It Is Meeting Its Obligations Towards Its Customers And Maintaining The Stability Of The Asset .