Late on Friday, as the impact from the collapse of Silicon Valley Bank (SIVB) crept into the core of cryptocurrency trading, Coinbase (COIN) put a halt to conversions between the USDC stablecoin and US dollars.
The cryptocurrency exchange announced in a tweet that it will “temporarily pause” the conversions while banks are closed over the weekend for the holiday. The marketplace reported that it intended to resume currency conversions on Monday.
In the wake of Silicon Valley Bank’s failure on Friday, the crypto industry’s second-largest stablecoin has been thrown into disarray, as evidenced by the stop in its trading. Traders who were concerned about the value of USDC redeemed $1.6 billion worth of USDC, which brought the overall supply of USDC down.
In the late afternoon, Circle verified that $3.3 billion of the $40 billion that supports its stablecoin was deposited with the lender that has now gone out of business. Due to the fact that the FDIC has taken control of Silicon Valley Bank and the USDC has, at least for the time being, lost its dollar peg, it is now unknown what will happen to that cash.
“Circle is presently defending USDC against a black swan failure in the U.S. banking system,” tweeted Circle Chief Strategy Officer Dante Disparte late on Friday night. “Black swan” refers to a catastrophic event that occurs very rarely. “Silicon Valley Bank is a crucial bank in the economy of the United States, and its bankruptcy – in the absence of a federal rescue plan – will have broader ramifications for business, banking, and entrepreneurs.”
In the tweet that it used to announce the temporary halt on conversions, Coinbase explained that “during moments of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours.” We intend to resume conversions on Monday morning, when the banks open for business.
