On March 10, Blockchain payment technology company and USD Coin (USDC) issuer Circle confirmed that transfers initiated Thursday to clear balances have not yet been processed, leaving $3.3 billion of its $40 billion USDC reserves. at Silicon Valley Bank (SVB).
Concern over the USDC grew late this week as Circle revealed in its latest audit that, as of January 31, $8.6 billion, or about 20% of its reserves, was on deposit with various financial institutions, including the recently broken Silvergate and the now closed SVB.
In an attempt to bring transparency to the matter, Circle revealed via Twitter on March 10 that:
“Following confirmation late today that transfers initiated Thursday to clear balances had not yet been processed, $3.3bn of the ~40bn USDC holdings remain at SVB.”
Circle said it now joins other clients and depositors in calling for the continuation of SVB, which the company says is important to the US economy. Circle stated on Twitter that he would follow any guidance offered by state and federal regulators.
2/ Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the US economy and will follow guidance provided by state and Federal regulators.
—Circle (@circle) March 11, 2023
Like other clients and depositors who have relied on SVB for their banking services, Circle joins the calls for continuity of this important bank in the US economy and will follow the guidance provided by state and federal regulators.
Adding to Circle’s statement, the firm’s chief strategy officer and global policy officer stressed that “Circle is currently protecting USDC from a black swan crash in the US banking system,” while calling for a bailout. of SVB by the Federal Deposit Insurance Corporation (FDIC):
“Without a federal bailout – it will have broader implications for business, banking and entrepreneurs.”
We join the calls from policymakers, regulators, investors, businesses and, most of all, people who rely on a well-functioning US banking system as a condition precedent of growing an economy. We will all be smarter on Monday.
— Dante Disparte (@ddisparte) March 11, 2023
We join the calls of policy makers, regulators, investors, businesses and, above all, the people who trust in the smooth functioning of the American banking system as a precondition for the growth of an economy. On Monday we will all be smarter.
In a statement to Cointelegraph, a Circle spokesperson also underscored that SVB is “one of six banking partners Circle uses to manage approximately 25% of USDC reserves held in cash.” While we await clarity on how the FDIC’s receivership of SVB will affect its depositors, Circle and USDC continue to operate as normal.”
Notably, prior to the announcement, USDC was below its $1 peg, at $0.98 according to CoinGecko data; however, soon after, the price dropped significantly to $0.93 at the time of writing.
The statement followed news that Silicon Valley Bank – a major financial institution for venture-backed companies – was shut down by California’s financial watchdog, making it the first bank to be insured by the California Federal Insurance Corporation. Deposits to fail in 2023.
Although the exact reason for the closure remains unclear, the California regulator has appointed the FDIC as receiver to protect insured deposits. SVB – one of the 20 largest banks in the United States – provided financial services to several cryptocurrency-focused venture capital firms, including Andreessen Horowitz and Sequoia.
Coinbase and Binance suspend conversions to USDC
Adding to the USDC-related issues, roughly 30 minutes after Circle’s last statement, Coinbase announced that it is “temporarily pausing USDC:USD conversions over the weekend while banks are closed.”
“During peak periods, conversions are dependent on USD transfers from banks clearing during normal banking hours. When banks open on Monday, we plan to resume conversions,” the company stated.
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
We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During peak periods, conversions are dependent on USD transfers from banks clearing during normal banking hours. When the banks open on Monday, we plan to resume conversions.
Such a move highlights the difficulty facing centralized crypto businesses now that Silvergate is no longer providing them with 24-hour banking services.
On the same day, Binance also announced via Twitter that the cryptocurrency exchange has “temporarily suspended USDC to BUSD auto-conversion due to current market conditions, specifically related to high inflows and increasing burden to support conversion.” .”
Binance has temporarily suspended the auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows and the increasing burden to support the conversion.
This is a normal risk management procedural step that we must take while monitoring the situation.
—Binance (@binance) March 11, 2023
Binance has temporarily suspended the auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows and the increasing burden to support the conversion.
This is a normal risk management procedural step that we must take while monitoring the situation.
“This is a normal risk management procedural step to take as we monitor the situation,” the firm added.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.
