- More than $3 billion backing USDC stablecoin is stuck in SVB, which collapsed on Friday.
As the industry comes to terms with the demise of Silicon Valley Bank, top cryptocurrency exchanges, Binance and Coinbase, have announced that they are suspending USDC conversions after the stablecoin issuer, Circle, disclosed exposure to the failed financial institution.
Coinbase posted on Twitter Friday saying: ‘‘we are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During the heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to recommence conversions.’’
USDC, or USD Coin, is the second largest stablecoin in the market behind Tether, pegged to the US dollar to act as a medium of exchange in the crypto market. Following the news, some investors have pulled their funds from the stablecoin, destabilizing the peg, which was at $0.8913 at press time, per CoinMarketCap. USDC was originally launched by Centre, a joint venture between Coinbase and Circle.
Binance Joins The Race To Break Ties With SVB
Blaming market conditions and not directly mentioning SVB, Binance suspended its auto conversion between USDC and BUSD.
‘‘Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion,’’ the exchange wrote. ‘‘This is a normal risk-management procedural step to take while we monitor the situation.’’
Circle revealed late Friday that it had $3.3 billion in cash backing USDC locked in SVB, representing part of the $40 billion stablecoin reserves. Dante Disparte, the firm’s Chief Strategy Officer, added that a wire transfer initiated Thursday to withdraw the funds was still pending. SVB is one of the six banks Circle uses to manage 25% of the USDC reserves in cash.
The California Department of Financial Protection and Innovation closed SVB Friday over liquidity challenges and placed it under the receivership of the Federal Deposit Insurance Corporation. FDIC created a new entity, the Deposit Insurance National Bank of Santa Clara, and transferred all the insured deposits due to the depositors ‘no later than Monday, March 13.’
