TL;DR:
- Binance and Coinbase have temporarily suspended USDC conversions as the contagion from the collapse of Silicon Valley Bank plays out.
- Circle, the company behind USDC stablecoin, held some of USDC’s cash reserves at Silicon Valley Bank, which was shut down Friday by California’s financial regulator.
- Circle disclosed that $3.3 billion worth of the cash backing USDC remains locked in Silicon Valley Bank.
Two of the world’s largest cryptocurrency exchanges, Binance and Coinbase, have temporarily suspended USDC conversions as the contagion from the collapse of Silicon Valley Bank plays out. Circle, the company behind USDC stablecoin, held some of USDC’s cash reserves at Silicon Valley Bank, which was shut down Friday by California’s financial regulator.
We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.
— Coinbase (@coinbase) March 11, 2023
Binance cited “current market conditions” and temporarily suspended auto-conversion of USDC to BUSD. Following Binance’s announcement, Coinbase also said it would suspend USDC conversion to USD while banks are closed over the weekend. Late on Friday night, Circle disclosed that $3.3 billion worth of the cash backing USDC remains locked in Silicon Valley Bank.
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.
— Binance (@binance) March 11, 2023
This is a normal risk-management procedural step to take while we monitor the situation.
The collapse of Silicon Valley Bank on Friday has sent shockwaves across the tech industry. Crypto has not been left unscathed, as several companies revealed their current exposure to the California bank, including Circle, Pantera, Avalanche, and bankrupt crypto firm BlockFi. The last time USDC saw its trading price drop to these levels was in May 2019 when the stablecoin saw an all-time low of $0.89.
Circle has confirmed that it is one of the customers and depositors that relied on SVB for banking services, and it joins calls for continuity of this important bank in the U.S. economy. The firm has tweeted that it will follow the guidance provided by state and Federal regulators. Like other customers and depositors, Circle disclosed that $3.3 billion worth of the cash backing USDC remains locked in Silicon Valley Bank. Silicon Valley Bank is one of six banks Circle uses for managing 25% of USDC reserves.
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.
— Circle (@circle) March 11, 2023
The USDC stablecoin was originally launched by Centre, a joint venture between Coinbase and Circle. The actions of Binance and Coinbase indicate caution over the collapse of Silicon Valley Bank and show how crucial it is for the stablecoin industry to have transparent and trustworthy reserve management practices. Circle has also tweeted that it will continue to operate normally while waiting for clarity on how the FDIC receivership of SVB will impact its depositors.
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