• USDC and DAI stablecoins both de-pegged temporarily due to the collapse of Silicon Valley Bank.
• Federal regulators stepped in to assure depositors that the access to their funds will be made whole, leading to a recovery for both coins.
• The Federal Reserve also said it would make additional funding available to banks to ensure they have the ability to support their customers.
USDC and DAI De-peg
The popular stablecoin USDC and decentralized stablecoin DAI both experienced a temporary de-peg after Silicon Valley Bank (SVB) collapsed and wiped out investor money. USDC issuer Circle was among the depositors in the bank, standing to lose approximately $3.3 billion in the process, while DAI’s price fell as low as $0.90 before recovering towards $1.
Regulators Step In
The recovery for both stablecoins came about after US regulators on Sunday stepped in and promised that depositors in the bank would get access to all of their funds, despite the closing of the banks. This has helped the market regain confidence in the coins, sending them back up to their $1 peg price as of press time. The promise came from a joint statement from the Department of Treasury, Federal Reserve and FDIC that expected this move would “protect U.S economy by strengthening public confidence in our banking system.”
Circle Assurance
In addition, Circle released a statement promising that all outstanding USDC tokens could still be redeemed for $1 USD even if external capital is needed to finance it: “[Circle] will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary”.
Federal Reserve Act
The Federal Reserve also said it would make available “additional funding” to banks so they can support their customers; further helping stabilize market prices for both coins by putting investors at ease that their deposits are secure with these banks.
Conclusion
All together then government reassurances have not only stabilized prices of USDC and DAI but also provided assurance for depositors that any money held with SVB will remain safe and accessible despite its closure; ultimately allowing investors more security when dealing with cryptocurrencies such as these two stablecoins.