Circle CEO: Not angry at SVB, problems caused by rising interest rates; USDC faces trust crisis, circulation continues to decline

Recently, the severe unpegging of USDC due to the collapse of a bank was resolved after intervention by the U.S. government. Yesterday, Jeremy Allaire, CEO of USDC issuer Circle, expressed his thoughts on the Silicon Valley Bank incident in an interview with CNBC, stating that he was not angry about its closure but rather blamed the policymakers for the mistake. Although the unpegging issue of USDC has been resolved, the circulation volume continues to decrease.

Related article: Circle announces new partner Cross River Bank, $3.3 billion crisis resolved

Circle CEO: Not Angry at Silicon Valley Bank

In an interview with CNBC, the host first asked what would have happened to the $3.3 billion in cash stuck at Silicon Valley Bank if there was no intervention from U.S. regulatory agencies.

Jeremy Allaire stated that Circle would have used its balance sheet and external capital when necessary and had many discussions on the matter, but fortunately, it did not come to that.

Jeremy Allaire also added that Circle had taken many preventive measures, such as transferring $5.4 billion in reserve assets to Mellon Bank in New York, and the U.S. Treasury bonds in Circle's reserve fund are managed by BlackRock, all to ensure a reliable infrastructure behind the digital dollar USDC.

"People often discuss how to protect the banking system from risks in the crypto industry, but we are now trying to protect the digital dollar from inherent risks arising from limitations in the banking system and some reserve banks," Jeremy Allaire said.

However, although the impact of multiple bank failures on the regulatory environment has not completely dissipated, Jeremy Allaire believes that the government has taken the right actions to prevent broader systemic risks.

Related article: FED releases market rescue plan BTFP: Depositors need not worry about runs

The host then asked, how angry is Circle about the crisis it faced due to the misalignment of assets and liabilities at Silicon Valley Bank, a bank that mainly holds U.S. Treasuries and cash reserves?

Jeremy Allaire said he wouldn't say he's very angry because no one expected such an issue from a bank with good credit ratings and fundamentals. This also points to the mistakes made by policymakers who should have been aware of the problems that rapidly rising interest rates would cause for financial institutions holding long-term bonds.

USDC Circulation Continues to Decrease

On the same day as Jeremy Allaire's interview, Circle officially released an update on USDC, stating that they are currently working on restoring the liquidity operation of USDC and handling a large number of minting and redemption requests while also aiming to partner with new trading banks.

However, after observing the on-chain data of USDC from Dune Analytics, it seems to be facing trust issues. Before 3/13, nearly $25 billion of USDC was destroyed due to runs. Although $4.6 billion was minted on 3/13 after the liquidity crisis was resolved and demand increased, the destruction continued, with an additional $20 billion being destroyed.

Compared to the pre-event circulation of 41 billion tokens, the current circulation of USDC is only about 37.5 billion, a decrease of 8.5% in less than a week, and the trend shows no sign of slowing down.