In a shock for crypto investors, top cryptocurrency exchanges Binance and Coinbase on Saturday temporarily suspended USDC stablecoin conversions after the collapse of Silicon Valley Bank (SVB), as Circle, the firm behind USDC, held some of cash reserves at the beleaguered bank.
Silicon Valley Bank has been shut down by US regulators who are now in charge of the bank’s deposits, according to the Federal Deposit Insurance Corporation. SVB’s collapse has sent shockwaves across the tech industry.
Coinbase said in a tweet that it was “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,” it added.
Binance said it 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”.
A Circle spokesperson said that “Silicon Valley Bank is one of six banking partners Circle uses for managing the approximately 25 per cent portion of USDC reserves held in cash”.
“While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally,” the spokesperson added.
According to Circle’s January data, the company had about $9.88 billion in cash deposited at regulated banks to back its stablecoin’s value, among other assets, reports TechCrunch.
Another US traditional bank Silvergate Capital on Friday also announced it was “wind down operations and voluntarily liquidate” its bank division.
The fall of cryptocurrency exchange FTX and an overall meltdown in the global crypto market is the reason behind the collapse ofASilvergate Capital — a lender of choice to startups and tech firms.
Circle had earlier said it moved “the small percentage of USDC reserve deposits held at Silvergate” to other banking partners.
USDC is the second-largest stablecoin by market capitalisation with a $43.5 billion circulating supply and over $6.3 billion in daily traded volume.