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Why Stablecoins such as Tether and USDC still worry the Fed
Sometimes a stablecoin is anything but. When the Bank of Silicon Valley collapsedBloomberg Terminal In March last year, crypto firm Circle Internet Financial Ltd. had $3.3 billion in cash reserves to back his USD Coin parked at the bank and was unable to get it out. Stablecoins are cryptographic tokens whose value is typically tied to a currency such as the US dollar. They offer traders a way to quickly move between more volatile coins and something closer to cash or a way to hold or send money without relying on a bank. They can track a normal currency in a variety of ways, primarily by holding assets such as cash or government bonds to support the value of the coin.
With around 8% of USDC reserves stuck in a failed bank, the stablecoin experienced its own panic. Traders rushed to exit, dragging its price well below $1 due to the dire situation. weekend when regulators were figuring out what to do about SVB. After the government intervened To restore the integrity of all the bank’s depositors, the price of USDC recovered. “Following last year’s banking crisis, Circle improved the market infrastructure behind USDC to become the strongest, most secure, and most transparent digital dollar on the internet today,” he said. said a Circle spokesperson.