Key takeaways:
- Binance and Coinbase announced temporary termination of USDC conversions.
- The move comes amid the collapse of the Silicon Valley Bank catastrophe creating a ripple effect across the crypto sector.
- Traders redeemed $1.6 billion of USDC, cutting its total supply, anticipating its stability.
Due to the current state of the market, particularly as it relates to heavy inflows and the growing strain to maintain the conversion, Binance has temporarily ceased automatic conversion of USDC to BUSD.
Concerns that Circle, the entity that created the USDC stablecoin, might have kept some of USDC’s cash reserves at Silicon Valley Bank, which California’s financial watchdog shut down on Friday, prompted the move.
Binance reiterates that this is a customary procedural risk management measure to implement as we keep an eye on the circumstance.
Coinbase, one of the top cryptocurrency exchanges in the US, also declared it will stop converting USDC to USD while banks are inaccessible over the weekend in response to Binance’s statement.
Among the community, there is a noticeable sense of panic. Many people are unsure as to whether the banks would even start up again. Coinbase has guaranteed that user assets are safe and accessible for on-chain sends notwithstanding market turbulence.
In response to a user inquiry, Coinbase also adds that Coinbase card transactions will be impacted because banks will be closed over the weekend, and the exchange will temporarily halt USDC:USD conversions.
The failures of Silvergate and now the SVB have sent ripples throughout the tech industry. Cryptocurrencies have not been spared, as numerous companies, including Circle, Pantera, Avalanche, and the defunct cryptocurrency firm BlockFi, have acknowledged existing exposure to the California bank.
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.
In addition, on-chain data shows that Circle redeemed a net $1.4 billion in USDC over the course of 8 hours. Crypto businesses including Coinbase and Jump Trading reclaimed between $850 million and up to $138 million in USDC in a bid to lessen risk.
