Binance And Coinbase Halts USDC Conversion Amid Dollar Peg Crisis
Two of the top crypto trading platforms, Binance and Coinbase, have reportedly suspended the USD Coin (USDC) conversion on their platforms. Accordingly, the two crypto exchanges took action after Circle was heavily hit by the Silicon Valley Bank (SVB) contagion.
The SVB Exposure
The latest development came amid worries that Circle, the USDC stablecoin issuer, could not withdraw its $3.3 billion reserves from SVB, which was subsequently shut down on Friday by California’s financial watchdog. However, in its statement, Binance cites the current market condition as why it is temporarily disabling USDC conversion on its platform.
The exchange noted on its Twitter post that this is a routine risk-management procedure Binance usually embarks on to monitor precarious situations. Similarly, the US-based crypto exchange, Coinbase has followed in the footsteps of Binance by announcing its suspension of USDC conversion to the US dollar.
According to the statement from the American exchange, in periods of high activity, conversions through USD transfers from banks are available during normal banking hours. Like Binance, Coinbase avoided mentioning Circle’s involvement with SVB, adding that normal conversions will continue on Monday.
The collapse of SVB on March 10 has sent jitters across the tech ecosystem, with crypto not left out of the contagion. After the announcement of SVB’s fallout, several crypto firms have come out to reveal their exposure to the California-based bank.
Circle’s $3.3 Billion Reserves
On March 10, the USDC stablecoin issuer revealed that it had failed to remove its $3.3 billion worth of USDC reserves from the struggling bank. According to Circle, SVB is among the six banks managing its 25% USDC reserves.
In a Twitter post, Circle noted that it, like other companies, relied on SVB for its banking services. As a result, the tweet said Circle joins the call for the bank’s continuity in the United States economy and will adhere to the guidelines outlined by the states and federal regulators.
Following the Circle announcement, its stablecoin (USDC) lost its USD peg and currently trades at $0.91, as revealed by CoinGecko data. The last time the stablecoin saw the same downtrend was in May 2019, when USDC’s price recorded its all-time low of $0.89.
Circle further noted that it is waiting to see how the Federal Deposit Insurance Corporation (FDIC) will provide clarity in its receivership of SVB and how it will impact depositors. The stablecoin issuer added that USDC would continue operating normally.
Accordingly, several crypto trading platforms have taken to Twitter to disclose that they have no exposure to the collapsed Silicon Valley Bank. The CEO of Binance, Changpeng Zhao, noted on his Twitter handle that his exchange has no exposure to SVB as did Paolo Ardoino, the CTO of Tether.
Meanwhile, crypto exchange Gemini has joined others, stating it has no working relationship with the bank.
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