Get the scoop on finance - sign up for mobile alerts
Regulators
| On
March 16, 2023

Circle CEO Jeremy Allaire Warns Contagion Risks Not Completely Gone Following USDC Depeg

By Mark Emem

Circle CEO Jeremy Allaire believes that the risks to the banking system haven’t completely disappeared days after the US federal government stepped in to protect depositors of the now-collapsed Silicon Valley Bank.

While praising the actions of the federal government, Allaire says in a new CNBC interview that contagion risks still remain.

ADVERTISEMENT

“Fortunately again, the path that the federal government took was I think the right path.

As we’ve seen, the risks of contagion, the risks of a broader fallout in the financial system appear to have been systemic.  And I think that President Biden and [U.S. Treasury] Secretary [Janet] Yellen, etc have made a good set of decisions there. I don’t think those risks have dissipated at this point entirely.”

The CEO of the USD Coin (USDC) stablecoin issuer says that Circle is protecting itself by reducing the deposits held in banks.

“The major precautions from our perspective are let’s just make sure that we have as little exposure as possible to embedded risk in the fractional reserve banking system, focus on custodians that really are not significant risk-taking cash custodians.

ADVERTISEMENT

And then obviously we’ve made this move with daily transparency into the short-term treasury bills in the circle Reserve fund as well.”

The fall of Silicon Valley Bank temporarily caused USDC to de-peg over the weekend amid revelations that Circle held billions in the financial giant.

While alluding to the fact that the fast pace of rate hikes by the Federal Reserve contributed to the fall of Silicon Valley Bank, Allaire says that the collapse came as a surprise.

“I think this also comes back to you know, is the [monetary policy] tightening working? It’s one way to ask, the tightening of rising interest rates. You know, have the policymakers themselves made an error in terms of you know what that’s going to do in terms of the long bond durations that some of these financial institutions hold?”

Silicon Valley Bank reportedly incurred a $1.8 billion loss after selling bonds below their par value.

ADVERTISEMENT

I

Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Check Price Action
Follow us on X, Facebook and Telegram
Surf The Daily Hodl Mix
&nbsp
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Generated Image: Midjourney