Circle withdraws its USDC reserve from struggling Silvergate
- Circle has transferred a portion of its leftover USDC reserve deposits from Silvergate to other partner banks.
- Silvergate’s Exchange Network (SEN), which Silvergate Bank previously offered to the broader digital assets market, has been discontinued.
- The rundown of platforms severing ties with Silvergate Network now includes Circle, Coinbase, Galaxy, and Paxos.
A small subset of the USDC reserve deposits that Circle, the USDC stablecoin issuer regulated in the US, had been keeping at the troubled Silvergate Bank have been transferred to its other banking partners.
Just four months after FTX’s demise, top crypto-friendly bank Silvergate is on the verge of failure, sending the cryptocurrency industry into a tailspin. The markets are dominated by fear and uncertainty as some of the biggest players in the industry battle with their financial insecurity.
As indications of trouble and a wider exposure to the risk of crypto assets became more obvious, Circle and Silvergate started to wind down their partnership last year.
The Circle Reserve Fund, which presently holds about 80% of USDC reserves, and several well-capitalised U.S. banks jointly hold all USDC reserves. Deloitte now reviews and attests to the total of these reserves each month; the first of these confirmations has been released and is accessible on Circle’s website.
In response to Silvergate’s concerns, Circle recognised them and stated that it was in the process of ceasing some of their services while also informing customers.
On March 2, Circle, the company behind the stablecoin USDC, tweeted a response to the continuing FUD surrounding its association with the struggling cryptocurrency bank Silvergate.
Many digital asset vendors are aggressively severing their connections with Silvergate. A recent announcement by Circle, a USDC issuer, that it was “unwinding” its relationship with Silvergate would have an impact on some of its services.
Silvergate Bank has stopped offering some of the services it once offered to the larger digital asset market. Included in this is Silvergate’s Exchange Network (SEN), which a select few Circle clients had previously used. Traditionally, this program offered Silvergate a network for payment transfers.
With a filing that warned that losses might leave the bank with less capital than it needs and that it was assessing its capacity to continue, Silvergate raised red flags. The firm also stopped paying dividends on preferred stock.
Following the unexpected turn of events, the bank’s shares quickly began to fall, and important partners such as Paxos Trust Co., Coinbase Global Inc., and Galaxy Digital Holdings Ltd. severed ties with the institution.