The post Will Circle be Able to Restore Stability to USDC After Signature Bank Failure? appeared first on Coinpedia Fintech News
Circle, a leading player in the crypto industry, has been impacted by the recent failures of Silicon Valley Bank and Signature Bank. The collapse of Signature Bank, a critical financial institution for the industry, has left a major hole in the industry’s backend infrastructure. As a result, Circle has found a new banking partner, Cross River Bank, to provide automated minting and redemption for USDC, a stablecoin pegged to the US dollar
Impact of Signature Bank Failure
Signature Bank was a key financial institution to the crypto industry, and its sudden failure has left a major hole in the industry’s backend infrastructure. Signet, a blockchain-based real-time payments system that’s supposed to work 24/7, was used by Circle, Coinbase, and many crypto trading firms. But with the death of Signature, Signet, too, is not functional.
Circle CEO, Jeremy Allaire, confirmed that due to the failure of Signature Bank, the company had to find a new transaction banking partner for USDC operations. Allaire announced that Circle has established a new partnership with Cross River Bank, which will provide automated minting and redemption for USDC stablecoin. The partnership has allowed Circle to resume USDC operations starting from Monday, ensuring seamless settlement and boosting confidence in the stability of the stablecoin.
USDC lost its peg to the US dollar on Friday, following uncertainty about how much of its funds were held in Silicon Valley Bank (SVB). Circle later confirmed that it held $3.3 billion, or 8% of the funds backing USDC, at SVB. However, Circle holds no USDC reserves with Signature Bank, which was closed by regulators on the same day.
The US Treasury and regulators have promised to ensure that all depositors with SVB and Signature Bank will be made whole, and the $3.3 billion USDC reserve deposit held at SVB will be fully available when US banks open on Monday. In addition, Circle will introduce automated USDC minting and redemption for customers through a new banking partner, Cross River Bank, which will go live this week. Despite the recent turbulence, USDC remains redeemable 1:1 with the US dollar.
Coinbase, another key company for USDC, had joined Signet to allow for real-time payments and settlements. However, it is unclear how the failure of Signature Bank will impact Coinbase’s operations. Coinbase paused redemptions between U.S. dollars and USDC on Friday and said they would reopen on Monday when normal banking hours resumed.
The recent failures of Silicon Valley Bank and Signature Bank have sent shockwaves through the crypto industry. The fate of USDC remains uncertain, but Circle is working to right the stablecoin and restore its peg to the U.S. dollar.
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