Binance and Coinbase, two of the largest cryptocurrency exchanges, announced on Friday night that they will temporarily suspend USDC conversions as the fallout from Silicon Valley Bank continues.
The moves were taken in response to suspicions that Circle, the firm behind the USDC stablecoin, had some of USDC’s cash reserves at Silicon Valley Bank, which was closed down by California’s banking regulator on Friday. (USDC was first introduced by Centre, a collaboration between Coinbase and Circle.)
Binance has temporarily banned auto-conversion of USDC to BUSD, citing “current market conditions” but not naming Silicon Valley Bank. “This is a standard risk-management procedure to follow as we monitor the situation,” the post stated. After Binance’s announcement, Coinbase, the largest cryptocurrency exchange in the United States, announced that it will suspend USDC conversion to USD throughout the weekend when banks are closed.
“During moments of heightened activity, conversions rely on USD transfers from banks that clear during normal banking hours,” Coinbase explained, without identifying Silicon Valley Bank specifically, and adding that conversions will resume on Monday once banks reopened.
The failure of SVB on Friday sent shockwaves through the technology industry. Several companies, including Circle, Pantera, Avalanche, and bankrupt crypto firm BlockFi, have acknowledged their existing exposure to the California bank.
Eventually, Circle announced late Friday night that $3.3 billion in funds backing USDC is still held in Silicon Valley Bank. Silicon Valley Bank is one of six banks Circle employs to manage 25% of its USDC reserves, according to the corporation. “Like other customers and depositors who relied on SVB for banking services, Circle joins demands for the continued existence of this essential bank in the United States economy and will follow the instructions provided by state and federal regulators,” Circle tweeted.
According to CoinGecko, the trading price of USDC, which is designed to remain fixed at $1, fell from $1.00 to $0.93 on Friday night. The stablecoin last saw these levels in May 2019, when it hit an all-time low of $0.89. “Circle and USDC continue to operate regularly while we await information on how the FDIC receivership of SVB will impact its depositors,” Circle tweeted.
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