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On March 10, Circle, a blockchain payment technology company and USD Coin (USDC) issuer, announced that a wire transfer initiated Thursday to remove balances had yet to be processed, resulting in $40 billion in USDC. We have confirmed that $3.3 billion of our reserves remain with Silicon Valley Bank (SVB).
Later this week, as Circle revealed in its latest audit that as of Jan. 31, $8.6 billion, or about 20% of its reserves, were withheld at several financial institutions, including recently bankrupt Silvergate. concerns about USDC are growing. Shutter SVB.
To provide transparency on this matter, Circle announced the following on Twitter on March 10th.
“At the end of the day, $3.3 billion of USDC’s $40 billion reserves remained in the SVB after it was confirmed that a wire transfer initiated Thursday to remove the balance had not yet been processed. .”
Circle said it is now joining other customers and depositors in seeking continuation of the SVB. The company claims this is critical to the US economy. Circle said on his Twitter account that it will follow guidance provided by state and federal regulators.
2/ Like other customers and depositors who have relied on SVB for their banking services, Circle will join the call for the continuation of this important bank in the U.S. economy and will follow guidance provided by state and federal regulators.
— Circle (@circle) March 11, 2023
In addition to Circle’s statement, the company’s chief strategy officer and head of global policy emphasized that “Circle is now protecting USDC from a black swan failure in the U.S. banking system.” Asked the Corporation (Federal Deposit Insurance Corporation) for an SVB relief plan. FDIC):
Without a federal bailout plan, it would have far-reaching implications for businesses, banks, and entrepreneurs.
We join the call from policymakers, regulators, investors, businesses, and most of all, those who rely on the U.S. banking system to serve as a good precedent for economic growth. We all get smarter on Mondays.
— Dante Disparte (@ddisparte) March 11, 2023
Notably, before the announcement, USDC was trading below the $1 peg of $0.98 according to CoinGecko data, but soon after, the price fell significantly to $0.93 at the time of writing.
The statement follows news that Silicon Valley Bank, the primary financial institution for venture-backed firms, has been shut down by California’s financial watchdog, making the Federal Deposit Insurance Corporation’s insurer the first bank to fail in 2023. continued.
The exact reason for the closure remains unclear, but California regulators have designated the FDIC as the beneficiary to protect insured deposits. One of the 20 largest US banks by total assets, SVB has provided financial services to several crypto-focused ventures, including Andreessen Horowitz and Sequoia.
Coinbase and Binance Pause USDC Conversion
About 30 minutes after Circle’s latest statement, in addition to USDC-related issues, Coinbase announced that it would “temporarily suspend USDC:USD conversions over the weekend while banks are closed.”
“During periods of high activity, the conversion relies on US dollar remittances from banks that clear during normal banking hours. We plan to resume conversions when banks open on Monday,” the company said. I’m here.
We are temporarily suspending conversion of USDC:USD over the weekend when banks are closed. During periods of high activity, conversions rely on US dollar transfers from banks cleared during normal banking hours. We plan to resume the conversion when the banks open on Monday.
— Coinbase (@coinbase) March 11, 2023
Such a move highlights the difficulties facing centralized cryptocurrency companies now that Silvergate no longer offers 24/7 banking services.
On the same day, Binance announced via Twitter that the cryptocurrency exchange had “temporarily suspended the automatic conversion of USDC to BUSD in relation to the current market conditions, especially the increased burden of supporting high inflows and conversions. ” announced.
Binance has temporarily suspended the automatic conversion of USDC to BUSD in relation to the current market conditions, especially the high volume of inflows and increased burden to support the conversion.
This is a normal risk management procedure that we perform while monitoring the situation.
— Binance (@binance) March 11, 2023
“This is a normal risk management procedure to be taken while monitoring the situation,” the tweet added.
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