Coinbase and Binance Suspend USDC Conversions
On Friday night, leading crypto exchanges Coinbase and Binance announced that USDC conversions were being suspended temporarily, as the contagion from the Silicon Valley Bank’s collapse plays out.
The actions came due to concerns that the company that issues the USDC stablecoin, Circle, had some of its cash reserves at the SVB, which announced its closure on Friday.
The announcement
Binance did not name the Silicon Valley Bank, but said that auto-conversion of USDC to BUSD had been suspended temporarily due to ‘current market conditions’.
The post from the crypto exchange said that they were monitoring the situation and had opted to take a step for risk management.
Binance’s announcement was followed by one from Coinbase, which said that USDC conversion to USD would be suspended, as banks remain closed over the weekend.
The largest crypto exchange in the US also did not name SVB, but said that conversions depend on USD transfers that are made via banks and cleared during regular banking hours.
It stated that conversions would begin again on Monday once banks reopen.
The collapse
Since SVB catered to the tech sector for the most part, its collapse sent shockwaves throughout the industry and crypto also took a hit.
A number of companies disclosed that they had exposure to SVB, including Circle, Avalanche, Pantera and bankrupt crypto lender BlockFi.
Late on Friday, Circle disclosed that Silicon Valley Bank had about $3.3 billion cash reserves backing its USDC stablecoin.
According to the company, SVB is one of the six banks it uses for managing 25% of its stablecoin’s reserves.
USDC
Circle said that just like other depositors and clients that used SVB’s banking services, it would follow the guidance that Federal and state regulators had provided.
On Friday night, USDC’s trading price went into freefall, even though it should remain pegged to $1. It dropped to $0.93, which had last happened in May, 2019 when the stablecoin had dropped to $0.89.
Circle said that while they were waiting to see how things would work out, the company and its stablecoin would continue to function as per usual.
