Binance and Coinbase are stopping USDC conversions

Recently, several stablecoins have run into problems after regulations. Unfortunately, USDC has no exemption from problematic situations. This morning, USDC has lost its peg to the US dollar. Binance and Coinbase have therefore temporarily halted the conversion of USDC.

USDC in trouble

USDC lost its link with the dollar this morning at 4 am Dutch time, at the time of writing the coin has lost almost 10% of its value on many crypto exchanges. The problems arose because USDC issuer Circle placed part of USDC’s collateral with Silicon Valley Bank (SVB).

Last week it was announced that this bank was closed by regulators because it had become financially unstable. Unfortunately, many US tech companies have exposure to SVB, including crypto companies like Circle. It had deposited $3.3 billion of USDC’s collateral with SVB. That is about 8% of the total reserves.

The problems illustrate well how little certainty exists in the crypto industry. USDC was seen by many as one of the most reliable stablecoins. The token has not yet gone to zero at the time of writing.

There are indications that it may still land on its feet. The bankrupt bank is a very important part of the tech industry and it is covered by the US Deposit Guarantee Scheme. Companies can file claims to get their money back over time. Unfortunately, it is not yet clear how long this will take.

Binance and Coinbase are stopping conversions

Binance has since announced that the automatic conversion of USDC to BUSD has been halted due to the crash. The company says it is closely monitoring the situation and that it is “normal risk management.”

Coinbase has also halted USDC trading. At least, trading in the USDC/USD trading pair is paused. Coinbase does not have USDC trading pairs with cryptocurrencies. The exchange also hopes to resume conversions on Monday, as soon as regular banks are open again. The company says it relies on regular banks for dollar deposits at busy times.

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