Circle

Watchdog group doubles down on Circle-Tron money laundering claims

The Campaign for Accountability released a new open letter criticizing Circle’s Cross Chain Transfer Protocol.

Nonprofit ethics group Campaign for Accountability (CfA) has doubled down on its money laundering claims against Circle, publishing a new open letter on Dec. 14 claiming that the USD Coin (USDC) issuer is facilitating the funding of terrorist organizations.

The CfA originally made these claims on Nov. 9 in a letter to United States Senators Elizabeth Warren and Sherrod Brown. Circle responded to the claims on Nov. 11, claiming the allegations were based on uncorroborated, unverified social media posts.

The new letter was also addressed to the two U.S. senators and was signed by CfA executive director Michelle Kuppersmith. In the new letter, Kuppersmith took aim at Circle’s Cross Chain Transfer Protocol (CCTP), a blockchain protocol that allows users to transfer USDC between multiple networks, including Tron.

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Circle denies claims of illicit financing and ties to Justin Sun

According to an open letter published on Circle’s blog, the company has not provided services to Justin Sun since February.

USD Coin (USDC) stablecoin issuer Circle has denied claims of illicit financing and ties to Tron founder Justin Sun in an open letter posted to Circle’s blog on Nov.

Circle’s open letter to U.S. Source: Circle

The post was published on Nov.

In the letter, Disparte claims that Circle has “recently became aware” of “false” claims being made about it by the “so-called Campaign for Accountability.” The letter adds that “Circle does not facilitate, directly or indirectly, or finance Hamas (or any other illicit actors).” In addition, it does not “bank” or provide financial services to Sun, Disparte claimed.

Disparte dismissed the allegation that Circle facilitated “major flows of funds to Hamas or Hezbollah,” claiming instead that these accusations are based on uncorroborated, unverified posts to social media.

Disparte also claimed that Circle stopped providing services to Sun in February, 2023, stating:

“Neither Mr. Sun and his affiliated companies in February 2023.”

The open letter from Circle appears to have been sent in response to a Nov. 9 letter from the nonprofit ethics group Campaign for Accountability, whose letter claimed that Circle has extensive ties to Sun’s Tron Foundation and major Wall Street investors and that Sun’s cross-chain protocol, SunSwap, is often used for money laundering.

Related: WSJ debacle fueled US lawmakers’ ill-informed crusade against crypto

Claims that crypto is being used to finance terrorism have been commonplace since the Israeli-Hamas war broke out on Oct. The media outlet later corrected its story, stating instead that $12 million in crypto “may have been” sent to these organizations.

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Tether supply hits $80B for the first time since May 2022 — Stablecoin rivals stumble

The supply of USDT across cryptocurrency exchanges has dropped 28% in 2023, hinting at an overall decline in demand for stablecoins.

Tether (USDT) continues to benefit from the ongoing turmoil in the U.S. dollar-backed stablecoin industry, with its market capitalization growing significantly in Q1 2023 at other stablecoins’ expense.

Tether market cap reaches $80 billion

On April 6, the circulating market capitalization of USDT surpassed $80 billion for the first time since May 2022, with a gain of $15 billion so far in 2023.

USDT circulating market cap 12-month performance. Source: Messari

On the other hand, the market caps of its chief rivals, namely USD Coin (USDC) and Binance USD (BUSD), fell by about $12 billion and $9.4 billion, respectively.

USDC and BUSD circulating market cap year-to-date performance. Source: Messari

Tether benefits from non-U.S. status

Crypto traders opted for Tether given the growing concerns around USD Coin and Binance USD.

Notably, USDC’s market capitalization slipped due to its $3.3 billion exposure to the now-collapsed Silicon Valley Bank and additional exposure to Silvergate Bank, while BUSD suffered after New York regulators ordered Paxos to shut down the stablecoin’s issuance.

USDC weathered the crisis after the Federal Deposit Insurance Corporation’s assurance that it would make depositors at the insolvent banks whole. As a result, the stablecoin recovered its dollar peg after losing it at the peak of the banking crisis in mid-March. 

USDC price performance YTD. Source: Messari

But a growing crypto crackdown in the U.S. has prompted investors to maintain distance from regional firms. For instance, Paxos confirmed that the Securities and Exchange Commission treats BUSD as an unregistered security.

On the other hand, Tether is a non-U.S. firm and has repeatedly assured that it has no exposure to insolvent U.S. banks. Nonetheless, it has faced scrutiny over its reserve assets and lack of proper audits for years, despite such issues becoming less of a concern among traders.

USDT supply drops across exchanges

Interestingly, the growth in the USDT circulating supply has coincided with a drop in its supply across exchanges.

Related: USDT issuer Tether has up to $1.7B in excess reserves, CTO says

Tether’s balance on exchanges has dropped 28% year-to-date to 12.88 billion USDT, according to Glassnode. In comparison, the aggregated stablecoin balance across exchanges has dropped by 41% YTD to $22.31 billion.

USDT vs. rival stablecoin balances across crypto exchanges. Source: Glassnode

The decline in stablecoin reserves coincides with a crypto market rally, suggesting that traders have been converting their crypto dollars to buy Bitcoin (BTC) and Ether (ETH).

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Stress test? What Biden’s bank bailout means for stablecoins

A major stablecoin depegging event raised concerns about the stability of these assets amid a U.S. banking crisis. The result may have been an improvement in their position in traditional finance.

The collapse of Silicon Valley Bank (SVB), which suffered a bank run after revealing a hole in its finances over the sale of part of its inflation-hit bond portfolio, led to a depegging event for major stablecoins in the crypto sector, leaving many to wonder whether it was a simple stress test or a sign of weakness in the system.

The second-largest stablecoin by market capitalization, the Centre Consortium’s USD Coin (USDC), saw its value plunge to $0.87 after it was revealed that $3.3 billion of its over $40 billion in reserves was held at SVB and was, as a result, possibly lost. Coinbase seemingly exacerbated the crisis when it, a member of the Consortium, announced it was halting USDC-to-dollar conversions over the weekend.

As USDC lost its peg, so did decentralized stablecoins using it as a reserve asset. The most notable of which is MakerDAO’s Dai (DAI), a cryptocurrency-backed stablecoin that has well over half of its reserves in USDC.

Stablecoins restored their peg after the United States government stepped in and ensured depositors at SVB and Signature Bank would be made whole, in a move meant to stop other entities from suffering irreparable damage. According to United States President Joe Biden, taxpayers did not feel the burn of the bailout, and the traditional finance system was safe after the intervention.

The crisis, however, did not end there. While the U.S. government stepping in helped stablecoins recover their peg, many quickly pointed out that taxpayers would ultimately suffer the depositors’ bailout.

The banking crisis’ effects on digital assets

Financial institutions have since banded together to protect other banks, with investors and depositors raising questions about the stability of a number of other institutions, including Deutsche Bank.

Credit Suisse collapsed after investments in different funds went south and an unsubstantiated rumor on its impending failure saw customers pull out over 110 billion Swiss francs of funds in a quarter from it, while it suffered a loss of over 7 billion CHF.

Recent: The secret of pitching to male VCs: Female crypto founders blast off

The collapse saw the Swiss government broker an “emergency rescue” deal where Credit Suisse was acquired by rival UBS at a steep discount. Speaking to Cointelegraph, Jason Allegrante, chief legal and compliance officer at blockchain infrastructure company Fireblocks, said that the banking crisis was partly caused by rising interest rates exposing banks with large portfolios of low-interest-rate bonds to risk.

Per Allegrante, the role of the liquidity coverage ratio, a regulatory requirement forcing banks to hold a certain amount of “high-quality liquid assets” to prevent these liquidity crunches, is not being openly discussed.

He said it’s “entirely possible we are in the early stages of a nationwide run on regional banks.” If this happens, he said, there will not only be widespread regional bank failure but there will “likely be further consolidation and concentration of deposits in a handful of large, systematically important banks.”

He added that such a crisis would put pressure on regional banks to sell assets to meet liquidity needs and could ultimately lead to more bank failures. Allegrante added that this would have “far-reaching consequences for the digital asset industry in the United States and abroad.”

Becky Sarwate, spokesperson and head of communications at cryptocurrency exchange CEX.io, told Cointelegraph that the crisis could be a boon for digital assets, saying:

“One thing is clear: Similar to how Bitcoin blossomed from the wreckage of the 2008 financial crisis, the failure of institutions like SVB and Signature Bank is compelling evidence for diversification across multiple investment verticals.”

Sarwate added that when “traditional pathways prove equally volatile from the perspective of a crypto curious participant, it throws the inherent risk of any market participation into relief.” She added that while digital assets lack some of the protections seen in traditional finance, they “offer an alternative set of benefits that, in our current climate, could be appealing to nervous investors.”

Investors holding onto stablecoins and earning yield through them, however, may have believed they were already diversifying and sidestepping the market rout that was occurring. Circle, the issuer of USDC, suggested the depeg event was a “stress test” that the system weathered.

Mitigating risk for stablecoins

If the Federal Deposit and Insurance Corporation (FDIC) were to extend insurance to crypto-related institutions, it could alleviate concerns about the security of digital assets under their custody. That same insurance helped USDC and other stablecoins recover their peg after the collapse of SVB, making a strong case for FDIC insurance to boost crypto adoption.

While that insurance typically only goes up to $250,000, the FDIC opted to make every depositor whole, essentially protecting Circle’s $3.3 billion in reserves held at the bank. Speaking to Cointelegraph, a spokesperson for the stablecoin issuer said that the events highlighted “how there’s a co-dependency — not a conflict — in banking and digital finance.”

The spokesperson added that just as the 2008 global financial crisis led to comprehensive banking reforms, it may be “well past time that the U.S. acts on federal payment stablecoin legislation and federal oversight of these innovations.” The spokesperson added:

“The emphasis here is the importance of shoring up markets and confidence, protecting consumers and ensuring that outcomes, in the long run, prove that the stress test could have been weathered by traditional financial firms and Circle.”

To Circle, a stable U.S. banking system that ensures deposits are safe and accessible is essential to the financial system, and the U.S. government’s actions to make depositors whole demonstrated their “recognition of this fact.” The safety and soundness of the banking system are critical to dollar-backed stablecoins, the firm added.

Circle has revealed that it has since moved the cash portion of USDC’s reserve to Bank of New York Mellon, the world’s largest custodian bank with over $44 trillion in assets under custody, with the exception of “limited funds held at transaction banking partners in support of USDC minting and redemption.”

The firm added it has “long advocated for regulation such that we can become a full reserve, federally supervised institution.” Such a move would insulate its “base layer of internet money and payment systems from fractional reserve banking risk,” the spokesperson said, adding:

“A federal pathway for legislation and regulatory oversight allows for the U.S. to be represented and have a seat at the table as the future of money is being discussed around the world. The time to act is now.”

Commenting on the depeg, Lucas Kiely, chief investment officer of Yield App, noted that what happened can be “largely attributed to fears around liquidity,” as most stablecoins are “essentially an IOU note backed by securities that holders don’t have a lien on.”

Per Kiely, stablecoins have “been sold as asset-backed instruments, which like any other asset carry investment risk.” Danny Talwar, head of tax at crypto tax calculator Koinly, said that USDC and Dai may “temporarily suffer from a lack of confidence over the short to medium term following the mini-bank run.”

CEX.io’s Sarwate, however, said the confidence in these stablecoins “has gone unchanged,” as both Dai and USDC “retreated back to their reflections of the U.S. dollar and resumed all prior uses they enjoyed before the depegging event.”

To members of the decentralized autonomous organization (DAO) that governs Dai, MakerDAO, confidence was seemingly unaffected. A recent vote has seen members of the DAO opt to keep USDC as the primary collateral for the stablecoin over diversifying with Gemini Dollar (GUSD) and Paxos Dollar (USDP) exposure.

Given USDC’s move of the cash portion of its reserves to a stronger custodian, the depegging event may have simply strengthened both stablecoins after a short period of panic.

Leveling the playing field

That strengthened position, according to Koinly’s Talwar, could also come as cryptocurrency startups and exchanges search for alternative banking providers, although the “de-banking of crypto businesses could seriously harm the sector and innovation in blockchain-based technologies” if they fail to find alternatives.

In the medium term, Talwar said, the collapse of cryptocurrency-friendly banks “will compound with the more crypto-native collapses from the past year, resulting in a challenging environment for blockchain innovation to thrive within the United States.”

Yield app’s Kiely said that the U.S. government’s recent bailout was different from the one seen in the global financial crisis, although it raises “questions over whether there needs to be an adjustment in the supervisory guidelines to address interest rate risk.”

The Fed’s bailout, he said, could be removing incentives for banks to manage business risks and send a message they can “lean on the government’s support if customer funds are mismanaged, all with no alleged cost to the taxpayer.”

Recent: How a TikTok ban in the US could affect the crypto industry

As for stablecoins, Talwar said he sees a need for more stablecoin options, even though the launch of euro-backed stablecoins helped in this regard. CEX.io’s Sarwate noted that the U.S. banking and stablecoin crisis helped “level the playing field between traditional finance and crypto.”

While crypto is still a nascent industry, she said, there’s “potential within the space for visionaries to lead by example and carve out an alternative to speculative investing. In the long term, this could help yield a more balanced system.”

In the typical crypto ethos, players in the space are already finding ways to mitigate risks associated with the traditional financial system. While U.S. regulators warn against crypto, the sector moves to strengthen its position in the financial world.

Circle prefers reserves and payment rails with the Fed, says exec

Circle’s Asia-Pacific vice president said the company currently holds 80% of its reserves but would ultimately like to keep all cash with the Fed in light of the recent banking crisis.

Circle has been subject to discussion in the crypto industry since the depegging of its USD Coin (USDC) stablecoin amid the collapse of Silicon Valley Bank (SVB) on March 10. Now that the company has cleared its backlogs and USDC has regained its 1:1 peg with the United States dollar, it looks toward the future — for the company and the industry. 

In an interview with Cointelegraph at WOW Summit Hong Kong, Raagulan Pathy, Circle’s Asia-Pacific vice president, said the company was reflecting on recent events and focused on having “more banking partnerships on a global basis.”

“We don’t have any plans to move reserves right now. We’ve got a very strong fund for where the reserves sit. We spent a lot of time building transparency around it and establishing that.”

After the SBV crash, Circle promptly announced a new banking partnership with Cross River and an expansion of its ties with BNY Mellon. Pathy said Circle currently holds 80% of its reserves and treasuries.

“We would ultimately like to keep all of our cash as well with the Fed and use the payment rails to the Fed, because that moves us away from our reliance on TradFi partners.”

Pathy continued to say that the company has no plans to move its headquarters, which is currently based in the U.S., and called the U.S. regulatory landscape “extremely fluid.”

However, he commented on the regulatory regimes of other countries like Singapore, which he praised for having a “measured approach toward regulation.” According to Pathy, the country has a “step-by-step” approach to crypto.

Related: USDC depeg will hinder stablecoins’ growth, increase regulatory scrutiny — Moody’s

Pathy also highlighted Circle’s significant presence in Singapore and a recent acquisition in Taiwan.

“Generally, as a company, we’re on a globalization path. We are looking at having more people on the ground in areas where we see a favorable environment.”

Companies in the space have increasingly targeted Singapore as a crypto-friendly destination in terms of regulation and prospects for innovation. On the other hand, the U.S. has been cracking down on the crypto industry. 

One commentator recently called actions from U.S. regulators a “surgical removal” of crypto. Many in the industry believe that the U.S.’s strict regulation enforcement tactics toward the crypto industry are creating a vacuum for other countries to swoop in to nurture a more “vibrant” scene.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

Banking turmoil pushes crypto to ‘no oversight,’ says Circle CEO

Crypto firms that have had the strongest position with United States regulation are now considered “unsafe,” Circle CEO Jeremy Allaire stated.

The ongoing crisis and uncertainty around the global banking system could push the cryptocurrency market into a more gray area in terms of regulation, Circle’s chief executive believes.

Jeremy Allaire, the CEO of the USD Coin (USDC) issuer, took to Twitter on March 23 to share his reflections regarding the market dynamics in the aftermath of the collapse of Silicon Valley Bank.

In the Twitter thread, Allaire highlighted the “deep market anxiety” about general exposure to the financial system of the United States and the risk of a large-scale U.S. banking system failure.

The Circle CEO emphasized that the ongoing banking crisis has a lot more potential to hurt crypto firms regulated in the United States rather than those regulated in other jurisdictions, stating:

“Ironically, the players who have had the strongest position with U.S. regulation and U.S. banking system integration, are considered ‘unsafe’, with fears that assets could be stranded.”

Allaire went on to say that the contagion from SVB could potentially drive the crypto market to a less regulated area, urging U.S. policymakers to think about what happens next. Addressing the White House and Congress, he argued that there has been no situation in the past 10 years where the U.S. so urgently needed a “clear, coherent and pragmatic policy.”

“We are in serious risk of seeing an entire strategic technology arena slip away from US leadership,” Allaire warned, adding:

“Right now, market participants are shifting into platforms with no oversight, totally opaque bank and risk exposures, and histories of lax financial risk/integrity controls. This doesn’t end well.”

Allaire stated that Circle will continue operating within a regulatory perimeter and will keep working to add “more transit and settlement banking partners.” He also stressed that USDC “has not missed a beat” and has never failed to mint or redeem USDC for $1, including “during the past week’s stress test.”

As previously reported by Cointelegraph, Circle has experienced major issues due to its exposure to the collapse of Silicon Valley Bank, with its USDC stablecoin briefly losing its 1:1 peg with the U.S. dollar. The stablecoin subsequently re-pegged amid Circle announcing Cross River as a new banking partner and expanding ties with BNY Mellon.

Related: Tether CTO on USDC depeg: ‘Bitcoin maxis were right all along’ | PBW 2023

Allaire’s remarks have echoed some observations in the cryptocurrency community, with some crypto enthusiasts expressing perplexity over how U.S.-regulated firms like Circle were affected by the crisis, while competitor “chads” like Tether (USDT) issuer Tether Holdings had experienced no issues so far.

As previously reported, Tether was one of the first companies to deny exposure to SVB and other troubled U.S. banks in mid-March. According to Tether chief technology officer Paolo Ardoino, the stablecoin issuer has no exposure to SVB, Signature Bank or Silvergate.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Circle CSO’s Twitter account breached by scammers

“Any links to offers are scams. We are investigating the situation and taking action accordingly,” wrote USDC issuer Circle.

According to an official post on March 22 from Circle, issuer of the USD Coin (USDC) stablecoin, the Twitter account for its chief strategy officer and head of global policy, Dante Disparte, has been compromised. In a previously deleted Tweet, Disparte’s account reportedly began promoting fake loyalty rewards to long-time users of USDC. 

Before the compromise, Disparte’s account tweeted about the firm’s regulatory developments and its participation in the ongoing Paris Blockchain Week. The security breach came less than a month after the stablecoin briefly depegged due to reserve deposits left in the custody of defunct American tech bank Silicon Valley Bank. The incident has since been resolved, and USDC has repegged, albeit a tiny variance with the stablecoin’s peg still exists at the time of publication.

At the time of publication, four Twitter posts left by the alleged scammer in Disparte’s name were removed. Only three posts with generic comments on the recent events surrounding USDC remain standing:

Circle CSO’s compromised Twitter account. Source: Twitter

Cointelegraph reported on March 11 that crypto whales suffered huge losses as a result of the USDC depegging incident. Shortly after, fake Circle accounts began surfacing on social media with promises of making users’ assets whole. Although the peg has been mostly restored, the redemption of USDC for U.S. dollars has nearly eclipsed $10 billion since the beginning of the month. 

Some decentralized finance protocols, such as that of Dai (DAI) stablecoin issuer MakerDAO’s peg stability module, reportedly had USDC hard coded as 1:1 in their smart contracts instead of reflecting their market value. On the day of the incident, MakerDAO filed an emergency proposal aimed at reducing its 3.1-billion USDC reserve exposure, which was used to collateralize DAI. Like USDC, DAI has mostly restored its peg with the U.S. dollar, albeit a small variance still exists at the time of publication. 

DeFi sees its biggest hack in 2023 as Euler loses $197M: Finance Redefined

DeFi suffered its biggest attack this year with a flash loan attack on crypto lending platform Euler Finance and the hackers are belived to be same that exploited a BSC based protocol in February.

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you significant developments over the last week.

The DeFi ecosystem was once again an exploiter’s paradise this past week as lending protocol Euler Finance fell victim to a flash loan attack resulting in a net loss of over $196 million — the biggest hack of 2023 so far.

Apart from the Euler Finance saga, USD Coin (USDC) depegging was the most significant event dominating last week’s headlines. Due to the collapse of Silicon Valley Bank, investors loaded their bags with USDC, along with an exodus of funds from centralized exchanges (CEXs) and decentralized exchanges (DEXs).

MakerDAO introduced an emergency proposal to increase its holdings of United States Treasury bonds by 150%, aiming to diversify its Dai (DAI) stablecoins’ collateral exposure.

MetaMask introduced new features with enhanced control to avoid privacy concerns. The new features allow users to manage which servers can receive their IP address.

The DeFi market had another bullish week owing to the growing positive sentiment in the broader crypto market amid major bank runs in the United States. Most of the top 100 DeFi tokens registered double-digit growth last week, with many tokens touching new multi-month highs.

Euler Finance hacked for over $195M in flash loan attack

Ethereum-based noncustodial lending protocol Euler Finance faced a flash loan attack on March 13. The attacker stole millions in DAI, USDC, staked Ether (StETH) and wrapped Bitcoin (WBTC).

According to on-chain data, as per the last update, the exploiter carried out multiple transactions, stealing nearly $197 million. The attack correlated with the deflation attack one month ago. The attacker used a multichain bridge to transfer the funds from the BNB Smart Chain to Ethereum.

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Crypto users turned to DEXs, loaded up on USDC after Silicon Valley Bank crash

Chainalysis data shows that hourly outflows from CEXs to DEXs spiked to over $300 million on March 11, soon after a California regulator shut down SVB.

A similar phenomenon occurred during the collapse of cryptocurrency exchange FTX last year amid fears that the contagion could spread to other crypto firms. However, data from the blockchain analytics platform Token Terminal suggests that the surge in daily trading volumes for large DEXs was short-lived in both cases.

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MakerDAO passes proposal for $750M increase in US Treasury investments

Lending protocol and stablecoin issuer MakerDAO passed a proposal on March 16 to increase its portfolio holdings of U.S. Treasury bonds by 150%, from $500 million to $1.25 billion.

The proposal aims to increase the protocol’s exposure to real-world assets and “high-quality bonds” following its DAI stablecoin losing its $1 peg during market volatility on March 11. The $750 million debt ceiling hike was approved by 77% of Maker’s delegates.

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MetaMask addresses privacy concerns with new features for enhanced control

Web3 wallet app MetaMask has introduced several new features to enhance privacy and give users more control, according to a March 14 blog post by the developer. The new features come after MetaMask was previously criticized for allegedly intruding on users’ privacy.

Previously, MetaMask used its Infura RPC node to connect to Ethereum automatically whenever a user first set up the wallet. Although the user could change the settings later, this still meant that the user’s public address was transmitted to Infura before they could change their node, according to a report from Ethereum node operator Chase Wright.

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DeFi market overview

Analytical data reveals that DeFi’s total market value climbed to $48 billion this past week. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a bullish week, with most of the tokens trading in green, barring a few.

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education in this dynamically advancing space.

USDC depeg will hinder stablecoins’ growth, increase regulatory scrutiny — Moody’s

“Financial institutions may reconsider adopting stablecoins to settle agreements involving tokenized securities out of concern over the coins’ potential volatility,” Moody’s said.

Recent turmoil in the traditional banking sector, culminating in USD Coin (USDC) losing its peg, could negatively affect stablecoin adoption and potentially increase calls for regulation, argued credit rating agency Moody’s Investors Service. 

In its latest “Sector Comment” report published on March 16, Moody’s says fiat-backed stablecoins could face new resistance following USDC’s depegging on March 10.

“Until now, large fiat-backed stablecoins had shown remarkable resilience, having emerged unscathed from past scandals such as the collapse of FTX,” wrote analysts Cristiano Ventricelli, Vincent Gusdorf, Rajeev Bamra and Fabian Astic. “However, recent events have shown that the reliance of stablecoin issuers on a relatively small set of off-chain financial institutions limits their stability.”

The sudden collapse of Silicon Valley Bank on March 10 was a significant risk event for USDC issuer Circle Internet Financial, which had $3.3 billion in assets tied up in the bank. Over the span of three days, Circle cleared roughly $3 billion in USDC redemptions as the value of its stablecoin plunged to a low of around $0.87.

By end of U.S. banking operations on March 15, Circle had “cleared substantially all of the backlog of minting and redemption requests for USDC,” the company said.

USDC quickly regained its peg after the Federal Deposit Insurance Corporation announced that it would backstop all deposits held at Silicon Valley Bank. Circle CEO Jeremy Allaire told Bloomberg on March 14 that his firm could now fully access its $3.3 billion reserves.

Related: Crypto Biz: SVB collapses, USDC depegs, Bitcoin still up

Although calls to regulate stablecoins have grown louder following the collapse of Terra, fiat-backed stablecoins like the one issued by Circle operate differently than Terra’s algorithmic token that failed in May 2022. Nevertheless, Moody’s believes that regulators are likely to pursue more stringent oversight of the sector moving forward.

The credit rating agency said that USDC was able to regain its peg only once U.S. regulators decided to repay Silicon Valley Bank’s unsecured deposits. “Otherwise, USDC could have suffered from a run and been forced to liquidate its assets,” Moody’s analysts said, adding:

“Given the current market volatility, such a scenario could, in turn, have caused more runs on banks holding Circle’s assets, which could have led to the depegging of other stablecoins.”

Crypto Biz: SVB collapses, USDC depegs, Bitcoin still up

Turmoil in traditional finance spilled over into Bitcoin and crypto markets, forcing federal regulators to step in.

Crypto investors should know by now that it doesn’t take much to topple a distressed multi-billion-dollar firm. On March 10, California regulators officially shut down Silicon Valley Bank (SVB) 48 hours after the company disclosed it was in financial distress. As Cointelegraph reported at the time, SVB is the first Federal Deposit Insurance Corporation (FDIC)-insured bank to fail in 2023. That crucial detail prompted federal regulators in the United States to step up and backstop SVB depositors before a bank run could ensue. Although government protections weren’t enough to stem a massive drop in bank stocks once markets reopened on Monday, Bitcoin (BTC) and the broader crypto market soared. Did FDIC bail out Bitcoin? Only time will tell.

The SVB fiasco triggered a short but intense period of fear and trepidation in crypto markets as Circle’s USD Coin (USDC) depegged. The only thing Circle did wrong was holding a portion of its deposits at SVB when it collapsed.

This week’s Crypto Biz tries to make sense of SVB’s failure and how it affected crypto markets.

Silicon Valley Bank shut down by California regulator

On March 10, the California Department of Financial Protection and Innovation shut down Silicon Valley Bank and appointed FDIC as the receiver to protect insured deposits. The news triggered a fire sale in crypto and financial markets as SVB was a top-20 U.S. bank by total assets. So, what compelled regulators to close the bank? Earlier in the week, SVB released its mid-quarter financial update, which disclosed a $1.8 billion loss tied to securities sales and the need to raise $2.25 billion to shore up operations. SVB was a trusted partner of many crypto-focused venture capital firms, but its demise was ultimately tied to duration risk, not crypto industry exposure. Washington put out the SVB fire quickly by announcing that all depositors, and not just accounts worth up to $250,000, would be protected. President Joe Biden later confirmed that shoring up depositors would not cost the taxpayer anything.

Circle ‘able to access’ $3.3B of USDC reserves at Silicon Valley Bank, CEO says

One of the companies caught in the crosshairs of SVB was stablecoin issuer Circle, which had $3.3 billion in reserves tied up at the failed bank. USDC lost stablecoin market share — and its peg to the U.S. dollar — once SVB collapsed because it wasn’t clear if and when Circle could access its funds. At its lowest point, USDC fell to around $0.87. The stablecoin has since returned to par with the dollar, with Circle confirming it could access reserves held at SVB. Circle lost significant market share over the past week due to ongoing USDC redemptions. USDC’s market cap currently stands at $38.4 billion, less than half of rival Tether, whose USDT is valued at nearly $73.6 billion.

Breaking: Signature Bank closed by New York regulators, citing ‘systemic risk’

SVB wasn’t the only crypto-friendly bank collapse this week. On March 12, the Manhattan-based Signature Bank was officially shuttered by the New York Department of Financial Services, allegedly to protect the U.S. economy and strengthen the public’s confidence in the banking system. “The actions that we took today were designed to limit the consequences of the depositor outflows from Silicon Valley and from Signature and to reduce any spillover effects,” a Treasury official reportedly said. Like SVB depositors, all accountholders at Signature will be made whole without affecting taxpayers. Signature Bank had nearly $89 billion in deposits as of Dec. 31, 2022.

South Korea launches ‘Metaverse Fund’ to expedite domestic initiatives

“Metaverse” is still a vague and underdeveloped concept, but South Korea is taking it very seriously. Seoul’s Ministry of Science and ICT announced it would allocate 24 billion won ($18.1 million) toward metaverse development as part of a bigger pot worth 40 billion won ($30.2 million). The newly launched Metaverse Fund is said to support mergers and acquisitions of various metaverse-related companies — a move that could give the country an upper hand in the still-evolving sector. The metaverse arms race continues. As Cointelegraph reported earlier this month, Mark Zuckerberg’s Meta won court approval to continue its metaverse acquisition plans.

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