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Top cryptocurrency exchanges Binance and Coinbase both said on Friday night that they would temporarily suspend USDC conversions as the contagion from the collapse of Silicon Valley Bank plays out.
The actions came amid concerns that 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. (USDC was originally launched by Centre, a joint venture between Coinbase and Circle)
Citing "current market conditions" without naming Silicon Valley Bank, Binance said it has temporarily suspended auto-conversion of USDC to 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.
This is a normal risk-management procedural step to take while we monitor the situation.
— Binance (@binance) March 11, 2023
“This is a normal risk-management procedural step to take while we monitor the situation,” the post read.
Following Binance’s announcement, Coinbase, the largest cryptocurrency exchange in the United States, also said it would suspend USDC conversion to USD while banks are closed over the weekend.
“During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours,” Coinbase said, also not naming Silicon Valley Bank explicitly, and adding that conversions would start again on Monday when banks have reopened.
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
SVB's collapse 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.
Finally, late on Friday night, Circle disclosed that $3.3 billion worth of the cash backing USDC remains locked in Silicon Valley Bank. The firm said 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
“Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow the guidance provided by state and Federal regulators,” Circle tweeted.
The trading price of USDC, which is designed to remain pegged at $1, went into freefall Friday night, dropping from $1.00 to $0.93, according to CoinGecko. The last time USDC saw these levels was in May 2019, when the stablecoin saw an all-time low of $0.89.
“While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally,” Circle tweeted.