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Binance and Coinbase have suspended USDC conversions following the failure of Silicon Valley Bank

Binance Coinbase Silicon Valley Bank
Source: Unsplash

Top cryptocurrency exchanges Binance and Coinbase temporarily stopped USDC stablecoin conversions on Saturday following the collapse of Silicon Valley Bank (SVB), as Circle, the company behind USDC, retained some of the bank’s cash reserves.

According to the Federal Deposit Insurance Corporation, Silicon Valley Bank has been closed down by US regulators who are now in charge of the bank’s deposits. The demise of SVB has sent shockwaves throughout the technology industry.

Coinbase said in a tweet that it was “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,” it added.

Binance claimed it had temporarily paused “auto-conversion of USDC to BUSD owing to current market conditions, notably related to heavy inflows & the increasing cost to support the conversion”.

A Circle spokesperson said that “Silicon Valley Bank is one of six banking partners Circle uses for managing the approximately 25 per cent portion of USDC reserves held in cash”.

“While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally,” the spokesperson added.

According to January statistics from Circle, the company had approximately $9.88 billion in cash deposited at licenced institutions to back the value of its stablecoin, among other assets, says TechCrunch.

Silvergate Capital, another US traditional bank, stated on Friday that it would “wind down operations and voluntarily liquidate” its bank section.

The bankruptcy of  Silvergate Capital, a lender of choice to startups and IT enterprises, is the result of the collapse of cryptocurrency exchange FTX and an overall breakdown in the global crypto market.

Circle previously stated that it has transferred “a small percentage of USDC reserve deposits held at Silvergate” to other banking partners.

USDC is the second-largest stablecoin by market capitalisation, with a circulating supply of $43.5 billion and a daily traded volume of more than $6.3 billion.