Big names in the crypto exchange industry have moved to slow things down for USDC by suspending its conversion. Binance, Coinbase, and Robinhood made the move, citing increased conversion activity and current market conditions.
The decision was necessitated following the confirmation of Circle’s exposure to the closure of Silicon Valley Bank (SVB). SVB is one of the biggest banks in the United States and is known for its support of start-up crypto firms. The collapse of SVB marked the second bank collapse this week after Silvergate’s liquidation.
Circle confirmed it had $3.3 billion of its reserve in SVB before it was shut down. This prompted unusually high activity in USDC, prompting the exchanges to take action.
Binance Suspends Conversion
One of the largest exchanges, Binance, was the first to halt USDC conversion. In a tweet late Friday, the exchange stated that it had suspended USDC to BUSD conversion.
Binance stated the halt was due to the increasing burden of supporting the USDC/BUSD conversion. It also noted it was a “normal risk-management procedural step” to monitor the situation better.
Coinbase and Robinhood Followed Suit
American-based exchange, Coinbase followed suit after the Binance tweet. Coinbase stated it would halt the conversion of USDC to USD during the weekend as banks are closed.
Coinbase explained that the large conversion requests in this period require USD transfers from the bank. Hence, it would not be able to sanction those conversions, as banks don’t operate on weekends. The exchange, however, assures customers it will plan a reopening on Monday.
Robinhood also announced it would be shutting down USDC conversion. Robinhood also cited increased conversion activity amidst the stablecoin’s depeg from dollars.
USDC is expected to rebound on Monday, as Circle has made plans on how to cover the lapses from SVB. Circle stated in a tweet on Saturday that it would cover the shortcomings of the SVB reserve from corporate resources. The stablecoin issuer also noted it would consider external capital if necessary.
Circle stated it would continue to operate normally while waiting for action from the Federal Deposit Insurance Corporation (FDIC). The FDIC is the receiver of the closed Silicon Valley Bank.
