Silicon Valley Bank’s (SVB) failure is front page news, and last week Circle notified the market that it had $3.3 billion in collateral for its USDC stablecoin held in custody there. Crypto traders reacted by selling USDC, forcing it down to 88% of its value relative to collateral holdings. In money market terms, this is breaking the buck. No one should be surprised about what happened – we wrote up the problem in our October 2022 report on stablecoins and Central Bank Digital Currencies.
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