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Circle calls on Congress to urgently pass stablecoin legislation amid SVB crisis

Stablecoin issuer Circle is calling on Congress to urgently pass legislation to regulate stablecoins in the wake of Silicon Valley Bank's failure, which resulted in market turmoil that briefly caused Circle's USDC (USDC-USD) stablecoin to break its peg to the dollar.

"I've been uploading dollars to the internet since 2019, and since 2019 there was this ongoing persistent conversation about risk and we've been met with complete inaction," Circle's chief strategy officer and head of global policy Dante Disparte told Yahoo Finance in an interview.

"I do think if this is the digital assets Dodd-Frank moment then it is time to act. Just as it took 2008 to get to comprehensive banking reforms, I think it's well past time that the U.S. acts and to act is not to ban innovation, it's to encourage responsible innovation. But there is a shortfall in action right now."

USDC broke the buck over the weekend after the company revealed it had $3.3 billion in reserves tied up in Silicon Valley Bank. USDC fell to as low as $0.89 on Saturday, but recovered after Circle pledged to use funds from its balance sheet to many older whole were SVB not to go through an orderly wind down.

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Regulators late Sunday stepped in to guarantee all deposits — both insured and uninsured — from Silicon Valley Bank. As a depositor at SVB, Circle will be made whole by the FDIC. Circle said it holds ~80% of its reserves in short-term Treasuries and ~20% in cash.

Disparte said Monday there's a serious policy conversation to be had and that regulators' intervention was the right choice to stave off contagion. He said he favors stablecoin legislation to come from House Financial Services Committee Chair and ranking member Patrick McHenry and Maxine Waters.

"It was the loss of confidence in a bank that triggered a risk in Circle's business," noting the "irony" that a company playing in the digital asset market like Circle has had to de-risk itself from its traditional banking partners.

"The global policy and regulatory conversation among banks and other regulators is [around] the likelihood that the digital asset economy would introduce risks to the real economy and to banks, and they've been trying to set up guard rails for any type of contagion," Disparte said. "And then in this bizarre twist of fate, a company like ours over the weekend, and since the failure of Silvergate, has been de risking itself of risks in banks."

SUQIAN, CHINA - MARCH 11, 2023 - Illustration: Encrypted payment company Circle, Suqian, Jiangsu, China, March 11, 2023. Crypto payments company Circle: Still has $3.3 billion of its $40 billion USDC reserves in Silicon Valley banks. (Photo credit should read CFOTO/Future Publishing via Getty Images)
Encrypted payment company Circle, Suqian, Jiangsu, China, March 11, 2023. Crypto payments company Circle: Still has $3.3 billion of its $40 billion USDC reserves in Silicon Valley banks. (Photo credit should read CFOTO/Future Publishing via Getty Images) (Future Publishing via Getty Images)

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