A number of prominent cryptocurrency exchanges, including Binance, Coinbase, and Robinhood, have said that they have chosen to momentarily block USDC conversions. The aforementioned notification is claimed to have been motivated by concern over the spread of the Silicon Valley Bank failure.
Also, the aforementioned revelation surfaced amid issues regarding claims that Circle, the entity that created the USDC stablecoin, has stored some of USDC’s cash reserves in Silicon Valley Bank. It is known that the banking regulator for California closed the aforementioned bank last Friday.
USDC Conversion Blocked
Binance has chosen to temporarily halt the automatic conversion of USDC to BUSD due to the “current market condition”. They have stated that because they are still keeping an eye on the situation, this action is a necessary element of their risk-management procedure.
After this industry-dominating news from Binance, Coinbase also made an announcement on the suspension of the USDC to USD conversion throughout the weekend while banks are closed. They have also stated that currency conversions heavily depend on bank transfers in USD that clear during regular business hours. Furthermore, the aforementioned conversions would resume on Monday after banks had reopened.
Shortly after the company behind Circle the Dollar Coin revealed that it had been unable to withdraw $3.3 billion of its $40 billion in reserves from Silicon Valley Bank, there was a sharp sell-off that eventually resulted in the stablecoin’s price falling below its $1 peg.
The report claims that on Thursday, Circle started a wire transfer to remove its funds from SVB. This occurred when the bank, which is protected by the Federal Deposit Insurance Corporation, was ready to cease operations. With $3.3 billion in USDC reserves still at SVB two days later, Circle has apparently verified that the wire transfers were not fully executed.