Stablecoin USDC breaks dollar peg after firm reveals it has $3.3 billion exposure to SVB

US cryptocurrency firm Circle’s USD Coin lost its dollar peg and fell to a record low on Saturday morning after the company revealed it has nearly 8% of its $40 billion in reserves tied up in failed lender Silicon Valley Bank.

USDC is known as a stablecoin, meaning that the value of the virtual currency must be tied to a reference currency. USDC was designed to trade at $1, but fell below 87 cents on Saturday, according to data from CoinDesk.

Regulators shut down SVB on Friday and seized its deposits in what has become the biggest U.S. bank failure since the 2008 financial crisis. The company’s spectacular collapse began late Wednesday when it surprised investors with news that it had to collect $2.25 billion to shore up its balance sheet. What followed was the rapid collapse of a highly respected bank that had grown alongside its technology clients.

In a tweet on Friday, Circle said it had $3.3 billion in remaining reserves at SVB. The company called for the bank’s continuity and said it would follow regulators’ guidance.

The cryptocurrency industry is still picking up the pieces after FTX’s sudden crash last year, and USDC’s break with the dollar could signal more trouble. Stablecoins, like banks, are vulnerable to runs.

SVB customers had withdrawn a staggering $42 billion in deposits by the end of Thursday, according to California regulatory filing. By the close of business that day, SVB had a negative cash balance of $958 million, according to the filing, and was unable to find sufficient collateral from other sources.

If USDC holders get scared or worry about not having enough money in reserve, they can also rush to sell or exchange their coins.

Circle did not immediately respond to requests for comment.