Circle calls for Fed backing of USDC following SVB collapse

The crypto company said surviving the “very serious stress test” of SVB proved its resiliency.

After having to shift $3.3bn out of Silicon Valley Bank last week, Circle, which operates one of the world’s biggest stablecoins, is calling for its currency to be backed by the US Federal Reserve.

The company’s USDC crypto token fell in value last week and Coinbase said it was temporarily pausing conversions from dollars to USDC.

Now the firm is saying a long-term solution for retail stablecoins could involve a wholesale central bank digital currency at the Fed.

“In some ways, the events surrounding SVB act as a vindication of what we have been advocating for and that is a full Fed reserve model, where we could have access to risk-free cash,” Circle senior policy specialist Tarleton Watkins said.

“Although it is rare to have cascading bank failures, like in the financial crisis of 2008, this event with SVB put Circle through a very serious stress test, and we have come through it.

“This shows the resiliency of our business model and operational model. It also provides an excellent learning lesson and prepares us for the next steps as to where regulation should go.”

This comes as the company applies for regulatory approvals in France in an effort to double down on its European expansion.

It has filed applications to become both a licenced Electronic Money Institution and a registered Digital Asset Service Provider.

“France’s comprehensive efforts towards innovation-forward crypto regulation are commendable and closely align with Circle’s vision for the future of the digital payments sector,” Circle co-founder and CEO Jeremy Allaire said.

“Further, we aspire to become one of the first companies to achieve full-authorisation under the reinforced PSAN licensing regime, and hope that our growth plans for the country will strengthen its position as a global hub for innovation,” he added.