Chose to exceed that and also not diversify at the same time. In my mind they have only themselves to blame. They could have gotten one or two more accounts if they are legitimate businesses.
Let's not act like Circle's options were either to put 3 billion in one bank, or open 1200 accounts at 1200 banks.
-Purchase high-limit cash insurance from a Reinsurer like Lloyds of London or Berkshire Hathaway up to their underwriting limit, perhaps $100M. Do this across 4-5 different banks with 4-5 different reinsurers.
-Put the remaining $2-2.5B into mixed US Treasuries of varying maturities
They did already have 77% of the collateral in short-term T-bills, and the 23% in cash was spread out across multiple banks. They held $3.3bn at SVB, but that's out of $42bn total.
So then it sounds like they probably had 10-15 banks (entirely reasonable for them to be expected to open this many accounts at unique banks, given their business model) which is a far cry from the 1200 OP complained about.
If your entire business model revolves around moving multiple billions of dollars via an asset-backed stablecoin model, it's reasonable to expect you to have dozens of bank accounts, in at least 3 time zones, and likely more.
I don't know why people (not saying you specifically) seem to have this expectation any entity should be able to deposit billions of dollars risk-free at a single institution.
Ironically it's often the same people who can intuitively grasp why to hold your crypto across multiple wallets, who cannot fathom that infinite $ cannot be deposited at a single bank, without risk.
If you're leaving 7 to 9+ figures in a single account, then either buy custom insurance, or only do business with banks which offer excess insurance.
If you have 3 billion deposits, why not have let's say 3 different accounts with billion each? They don't cost that much money. And then even if one bank has system failure preventing transactions, you could have two others working. Or even some reasonable amount like one with each top 10 in users. With some amount of money in each allowing customers even better interaction.
They actually had like $12B split across 5 or 6 banks. But yeah, they definitely could've split it better. "No more than $1B per bank" seems like an easy rule, and even maxing at $500M could be doable.