Tag: Reserves

Circle’s USDC Reserves Remain Stuck at SVB, Raises Concerns Over Crypto Stability

by Blockchain News

Circle is one of the leading issuers of USDC, and the company has been on a mission to make it the preferred stablecoin in the cryptocurrency space. However, recent developments have raised concerns over the stability of USDC and its issuers.

On March 10, Circle confirmed that $3.3 billion of its $40 billion USDC reserves held at Silicon Valley Bank (SVB) have not been processed, despite wires being initiated on Thursday to remove the balances. This has raised concerns over the stability of USDC and its issuers, as investors worry about the possibility of a sudden loss of value.

This development follows Circle’s disclosure in its latest audit that as of January 31, $8.6 billion, or roughly 20% of its reserves, was held in several financial institutions, including the recently bankrupted Silvergate and the now-shuttered SVB. This has raised questions over Circle’s risk management practices and its ability to ensure the stability of USDC.

Circle has assured investors that it is working to resolve the issue with SVB and that it is confident in the stability and liquidity of USDC. However, the incident has once again highlighted the need for increased regulation and oversight of stablecoins and their issuers.

The cryptocurrency industry has long been resistant to regulation, viewing it as antithetical to the decentralized and open nature of cryptocurrencies. However, incidents like this one highlight the potential risks and vulnerabilities of the industry, and the need for regulatory frameworks that can protect investors and ensure the stability of cryptocurrencies.

The stability of stablecoins like USDC is crucial to the development and adoption of cryptocurrencies, as they provide a less volatile alternative to Bitcoin and other cryptocurrencies. However, incidents like this one raise questions about the reliability of stablecoins and their issuers, and highlight the need for greater transparency and oversight in the industry.

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Anchor protocol’s reserves head toward depletion due to lack of borrowing demand

by Cointelegraph

Anchor, the flagship savings protocol of the Terra Luna (LUNA) ecosystem, has seen its reserves decline by 35.7% in the past seven days according to Terra.Engineer. Since the beginning of December, the amount of Terra USD Stablecoin (UST) held in the “terra1tmnqgvg567ypvsvk6rwsga3srp7e3lg6u0elp8” smart contract has declined by over 50%, with only $35.7 million remaining.

As a savings protocol, users deposit their UST assets via their wallets and earn up to 20% yields as their principal is lent out to borrowers, who pay interest on the loan amount. Borrowers must deposit collateral to ensure the lender can get their money back in the event of a default. In addition, Anchor stakes the collateral it receives to generate rewards for depositors.

Whenever there is a deficiency between the income generated through borrowers’ interest, collateral staking, and the yield expenses paid out to depositors, Anchor must tap into the aforementioned UST reserves to make up for the difference. Last July, its creator Terraform Labs injected 70 million UST into the reserve protocol, and its value was relatively stable. But in the past 60 days, the total deposit amount has increased from $2.3 billion to $6.1 billion, while the total borrowed amount only increased from $1.2 billion to $1.5 billion.

In bear markets, investors typically flock out of volatile assets in search of stable ones, such as high-yield savings protocols. However, the growing discrepancy between Anchor’s deposits and borrowings has placed severe pressure on its reserves. If the trend were to continue, the reserve would run out in the coming months, and Terraform Labs would need to inject another round of UST for liquidity or sharply lower Anchor’s promised interest rate.