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Crypto investors pull $3 billion from stablecoin USDC in three days

Published 2023-03-16, 05:46 a/m

By Elizabeth Howcroft

LONDON (Reuters) - Crypto investors pulled around $3 billion overall from the stablecoin USDC in three days, the company behind the token said in a blog post on Thursday, as investors rushed to redeem their holdings in the wake of the collapse of Silicon Valley Bank.

USDC broke its dollar peg on Saturday after Circle revealed that $3.3 billion of the coin's reserves were at SVB.

The stablecoin fell to as low as $0.88, according to CoinGecko data, but returned to $1 on Monday. Circle announced it would allow automatic USDC redemption through a new banking relationship, with Cross River Bank.

Stablecoins are cryptocurrencies designed to maintain a constant exchange rate with traditional currencies. USDC is the second-biggest stablecoin with a market cap of $37.6 billion.

From Monday to Wednesday, Circle processed $3.8 billion of USDC redemptions (investors swapping their tokens back into U.S. dollars) and created $0.8 billion more of the token, Circle's blog post said, meaning investors have pulled around $3 billion overall in the three days.

The rapid outflows come after U.S. banking regulators issued a fresh warning last month that crypto-related deposits in banks could be subject to liquidity risks. The regulators highlighted deposits linked to stablecoins as susceptible to volatility during periods of market stress if there is a rapid influx of redemption requests.

In the past week, investors have pulled a net $6 billion from the coin, according to CoinGecko data.

"The events of the past week have impacted the liquidity operations for USDC," Circle said.

"We will continue efforts to add additional transaction banking partners."

(Reporting by Elizabeth Howcroft; Editing by Sharon Singleton)

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