Binance said it will halt USDC conversion to USD over the weekend.
Circle said that Silicon Valley Bank still has $3.3 billion underpinning USDC.
The two leading cryptocurrency exchanges, Binance and Coinbase, announced on Friday night that they will temporarily halt USDC conversions until the ripple effect of the collapse of Silicon Valley Bank plays out.
The action was taken because of fears that USDC stablecoin issuer Circle was keeping part of the stablecoin’s cash reserves at Silicon Valley Bank, which was closed on Friday by California’s banking regulator.
Binance has announced that automatic USDC-to-BUSD conversion would be temporarily disabled due to present market circumstances, however, it did not specify Silicon Valley Bank by name. When Binance said it will halt USDC conversion to USD over the weekend, the biggest cryptocurrency exchange in the United States, Coinbase, also announced it would do the same.
Coinbase stated:
“During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours.”
Shockwaves Across the Sector
The exchange also did not mention Silicon Valley Bank by name but did say that conversions will resume on Monday when the institutions reopened.
The SVB bankruptcy on Friday sent shockwaves across the entire IT and crypto sector. Circle, Pantera, Avalanche, and even insolvent crypto business BlockFi have all acknowledged their current exposure to the California bank, showing that the industry as a whole has not been spared.
Late on Friday, Circle said that Silicon Valley Bank still has $3.3 billion underpinning USDC. Silicon Valley Bank is one of six banks Circle employs to manage 25% of USDC reserves, according to the company.
The trading price of USDC, which is supposed to be fixed at $1, plummeted from $1.00 as the news broke. The price of USDC at the time of writing is $0.9091 as per CMC.