Circle, a blockchain payment technology company that also issues USD Coin USDC, verified on March 10 that wire transfers intended to remove balances that were started on Thursday had not yet been completed, leaving $3.3 billion of its $40 billion in USDC reserves at Silicon Valley Bank (SVB).
Due to Circle disclosing in its most recent audit that as of January 31, $8.6 billion, or roughly 20% of its reserves, was held up in several financial institutions, including the recently bankrupt Silvergate and shuttered SVB, worries about USDC have been increasing as of late this week.
In an effort to be transparent, Circle stated the following on March 10 via Twitter:
“Following the confirmation toward the finish of today that the wires started on Thursday to eliminate balances were not yet handled, $3.3 billion of the ~$40 billion of USDC reserves stay at SVB.”
Circle declared that it has joined other clients and depositors in asking for the continuation of SVB, which the company claimed was crucial for the American economy. On Twitter, Circle announced that it would abide by any instructions given by local, state, and federal authorities.
The firm’s chief strategy officer and head of global policy stressed, in addition to what Circle had already said, that. “Circle is currently protecting USDC from a black swan failure in the U.S. banking system,”. And he proposed an SVB recovery plan from the Federal Deposit Insurance Corporation (FDIC):
Without a Federal rescue plan – will have broader ramifications for business, banking and entrepreneurs.
A spokesperson for Circle also emphasized that SVB is “one of six banking partners Circle employs for managing roughly 25% of USDC reserves held in cash. Circle and USDC are still operating regularly as we wait for information on how the FDIC’s receivership of SVB will affect its depositors.
Notably, according to CoinGecko data, USDC was trading at $0.98 before the news, sitting below its $1 peg. However, after the announcement, the price sharply fell to $0.93 at the time of writing.
The declaration came after it was reported that Silicon Valley Bank, a significant financial institution for venture-backed businesses. Had been closed down by California’s financial watchdog, making it the first bank insured by the Federal Deposit Insurance Corporation to fail in 2023.
Despite the fact that the precise cause of the closure is still unknown. The California regulator named the FDIC as the receiver to safeguard insured assets. One of the top 20 banks in the US by total assets, SVB, provided financial support to a number of venture capital firms with an emphasis on cryptocurrencies, including Andreessen Horowitz and Sequoia.
Coinbase and Binance stop converting USDC.
Approximately 30 minutes after Circle’s most recent comment. Coinbase stated that it is “temporarily pausing USDC:USD conversions over the weekend while banks are closed.” This further compounds the problems related to USDC.
“During moments with significant action, conversions require USD transfers from the banks to clear during normal working hours. We anticipate restarting conversions when banks resume on Monday, according to the company.
This action emphasizes the challenges that centralized crypto businesses are now encountering since Silvergate is no longer offering them round-the-clock financial services.
Similarly on the exact same day. Binance tweeted that it had “currently suspended auto-conversion of USDC to BUSD due to the present state of the market. Particularly connected to high inflows & the increasing burden to support the conversion.”
The company added, “This is a standard risk-management procedure step to take while we watch the situation.