USDC Depeg — March 2023

Circle Internet Financial issued USDC, the second-largest dollar-pegged stablecoin, with the headline claim of full 1:1 backing by short-duration US treasuries and dollar deposits held at multiple regulated banking partners.

Silicon Valley Bank failed on 10 March 2023 after a sequential withdrawal of approximately $42 billion in deposits — concentrated within a single trading session — exhausted its operational liquidity. California regulators seized the bank and the FDIC was appointed receiver.

Circle disclosed on the evening of 10 March that $3.3 billion of USDC reserves — approximately 8% of total backing — was held at the bank. With FDIC insurance limited to $250,000 per account holder, USDC market participants priced significant risk of loss into the secondary market. USDC traded as low as $0.87 on Coinbase and at similar discounts on the Curve 3pool over the weekend.

On Sunday 12 March the FDIC, US Treasury and Federal Reserve issued a joint statement announcing that all SVB depositors would be made whole regardless of insurance cap. USDC recovered to its $1.00 peg by Monday market open. Circle migrated its banking relationships in subsequent months and disclosed further reserve transparency.