A major cryptocurrency operated by Circle Internet Financial Ltd. meant to mimic the value of the U.S. dollar dropped sharply after the company said it had $3.3 billion tied up in the collapsed Silicon Valley Bank, the Wall Street Journal reported. USD Coin fell below 87 cents on Saturday morning, according to data from CoinDesk. The virtual currency, known as a stablecoin, is designed to trade exactly at $1. It is backed by real U.S. dollars and short-term government debt, and sits at the heart of cryptocurrency trading. Breaking USD Coin’s peg with the dollar has the potential to send shock waves through the cryptocurrency world still reeling from the collapse of FTX. For crypto traders, the decline in the value of USD Coin is reminiscent of the worst moments of the 2008 financial crisis when the Reserve Primary Fund, a money-market fund that most investors treated as the equivalent of cash, “broke the buck” in the wake of Lehman Brothers’ failure and saw its net asset value fall below $1. Stablecoins such as USD Coin have become an increasingly critical part of the digital-asset ecosystem, accounting for over $130 billion in market value, up from just $11 billion in June 2020. Crypto traders rely on stablecoins to quickly get in or out of their positions in more volatile cryptocurrencies, while companies often store their capital and profits in stablecoins.
