Binance And Coinbase Scramble To Halt USDC Conversions Amid Silicon Valley Bank Chaos

Cryptocurrency exchanges Binance BNB/USD and Coinbase Global Inc COIN, two of the top cryptocurrency exchanges, announced temporary suspensions of USD Coin USDC/USD conversions due to concerns about the fallout from the collapse of Silicon Valley Bank, a subsidiary of SVB Financial Group SIVB.

The move followed worries that Circle, the company behind USDC stablecoin, held some of USDC's cash reserves at Silicon Valley Bank, which California's financial regulator shut down.

Binance suspended the auto-conversion of USDC to BUSD, citing "current market conditions" without naming Silicon Valley Bank.

The exchange called it a "normal risk-management procedural step to take while we monitor the situation."

Binance 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.

This is a normal risk-management procedural step to take while we monitor the situation.

— Binance (@binance) March 11, 2023

Coinbase, the largest cryptocurrency exchange in the U.S., also suspended USDC conversion to USD while banks were closed over the weekend.

Coinbase said conversions would start again on Monday when banks reopened, adding, "During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours."

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

Circle on Friday revealed that $3.3 billion worth of the cash backing USDC remains locked in Silicon Valley Bank.

Circle said Silicon Valley Bank is one of six banks it uses for managing 25% of USDC reserves.

Also read: South Dakota Governor Vetoes Bill To Exclude Bitcoin, Ethereum, Other Cryptos From Money Definition

The company expressed support for the bank's continuity and said it would follow the guidance provided by state and federal regulators.

The collapse of Silicon Valley Bank has sent shockwaves across the tech industry.

Several companies have revealed their current exposure to the California-based bank, including Circle, Pantera, Avalanche AVAX/USD, and bankrupt crypto firm BlockFi.

The trading price of USDC, which is designed to remain pegged at $1, plummeted from $1.00 to $0.93 on Friday night, according to CoinGecko.

The last time USDC saw these levels was in May 2019, when the stablecoin hit an all-time low of $0.89.

Circle tweeted that "While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally."

Next: JPMorgan Predicts Impending Disaster For Crypto Market Following Silvergate Shutdown