USDC - Circle Impact on Web3: Analysis π¨βπ«πΈ
Circle's infrastructure supports top crypto platforms and players
The Company Behind USDC: Circle
Circle is a fin-tech company that issues USDC aka the stablecoin that is quoted as one of the most backed and regulated stablecoins to date. USDC is also a digital currency pegged to the value of the US dollar. The company was founded in 2013 and has had a major come up in recent years among stiff stablecoin competition. The USDC stablecoin can be used for a variety of purposes, including sending and receiving payments, trading on cryptocurrency exchanges. Circle has established itself as a leader in the stablecoin market, with USDC becoming one of the most widely used stablecoins in the cryptocurrency ecosystem.Β
Infrastructure and Service At Scale
Circle provides infrastructure to many of the most well known platforms and major players in the crypto space. Their token reaches most main cryptocurrency exchanges (both centralized and decentralized).Β
Where theres Smoke Theres Fire
Despite the major success of Circle and their USDC token, Circle has seen recent troubles the past few weeks. SilverGate Bank was the first of dominoes that fell regarding Circle. SilverGate Bank made news headlines recently regarding Crypto platforms distancing themselves from SilverGate Bank which touted themselves as the top bank for crypto business. This caused a bank run on SilverGate Bank and a major collapse in stock price which caused SilverGate to collapse. Circle was using SilverGate as one of their Banks to do services with. Subsequently Web3 platforms like Recur, DC NFT (Palm NFT Studio) and Dapper Labs announced they would be suspending their fiat cash out services as they were using Circle to provide these services to their users. DC NFT (Palm NFT Studio) reported via an email on March 1st, 2023 that Circle would be phasing out its wire transfer service and on March 13th, 2023 DC NFT (Palm NFT Studio) reported that Brazil, India, Indonesia, Latvia, Mexico, the Philippines, Turkey, and Vietnamβs payments would not be processed anymore.Β
Out Of The Frying Pan Into The Fire
SilverGate Bank caused another bank to follow suit amid fears of another bank run type scenario. Silicon Valley Bank was next in line and yet another bank that provided services to crypto platforms including Circle. The next day Silicon Valley Bank would post a major loss to their stock as well the same scenario that played out with SilverGate. Circle would then tweet that they had exposure to SVB after SVB had collapsed which had Circles reserves that would back the USDC token itself.Β
USDC Depeg and Repeg
After Circle reported their exposure to SVB, Circles token USDC would depeg from its 1:1 value to USD which was touted as the best stable coin in the industry causing major shock throughout the entire crypto space. On March 11th Circle would announce that the FDIC may insure that all funds may be secure given that Circle has initiated a withdrawal which would put some investors at ease. Over the weekend the next day or so it was unclear whether banking authorities would step in. Finally on Sunday the Government stepped in to protect SVB depositors and would allow people to withdraw and have full access to their funds caused the USDC token to repeg.Β
Conclusion
Itβs unclear how far the dominoes could fall as other banks like Signature bank have collapsed and even major banks have posted major stock losses. One thing is for certain though, crypto has ripped in price recently. Meanwhile Circles USDC token took a credibility hit despite it being touted as one of the most secure and more regulated stablecoins. Amid banks collapsing, crypto and defi has given folks a place of refuge amid fears of more possible bank runs. In the process of money flowing back into crypto, this may have also squeezed some of the shorts in the process. Tokens like Bitcoin and Ethereum have posted solid gains the past couple days. Time will tell how this will all play out but it appears crypto, defi and BTC is doing what it was created to do against the traditional financial systemβs woes.Β
~This episode is sponsored by Kraken~ Kraken website β kraken.pxf.io/PBN