To protect itself, the company will cut deposits at banking institutions

Circle CEO warns of continued risks to the US banking system

16.03.2023 - 12:00

297

3 min

What’s new? Risks to the US banking system continue despite the efforts of the authorities to protect depositors of failed banks, said Circle (issuer of the USDC stablecoin) CEO Jeremy Allaire. In an interview with CNBC, he said that Circle will protect itself by cutting deposits at banking institutions.

The full version of the interview

What other statements have been made? Allaire thinks that there were risks of a broader defeat of the financial system in the market and that the actions of the federal government, led by President Joe Biden and Treasury Secretary Janet Yellen, were correct. However, he does not think those risks have completely disappeared at this point.

Circle continues to take protective measures, including reducing deposits held at banks and focusing on institutions that do not hold high-risk cash. In addition, the company has increased transparency on short-term treasury bills in the reserve fund.

Circle and Coinbase accuse US banks of destabilizing the crypto market

Circle and Coinbase accuse US banks of destabilizing the crypto market

The companies’ representatives stressed that it was TradFi that infected the crypto industry, not the other way around

Read further

According to Allaire, the collapse of the Silicon Valley Bank (SVB) came as a surprise to him.

“I think this also comes back to you know, is the [monetary policy] tightening working? It’s one way to ask, the tightening of rising interest rates. You know, have the policymakers themselves made an error in terms of you know what that’s going to do in terms of the long bond durations that some of these financial institutions hold?” Circle CEO wondered.

Circle situation. As a result of SVB’s bankruptcy, the USDC stablecoin temporarily lost parity with dollars, and investors began transferring the asset en masse into other stablecoins. On March 13, Allaire announced that reserves from SVB would be transferred to BNY Mellon Bank, reassuring users that the funds were safe. On the same day, the company was able to resume access to its funds at SVB. Allaire also stated that USDC is “the safest digital dollar on the internet.”

As of March 16, USDC has fully regained its peg to the dollar and is trading at $1,00, according to aggregator CoinGecko.

Author:

Michael Golikov Michael Golikov

Subscribe to Getblock Magazine and stay up to date with the latest news from the world of cryptocurrencies and the digital economy