USDC’s Dollar Peg Fumbles, Coinbase Pauses USDC:USD Conversions

Circle, the issuer of the USDC stablecoin is facing massive heat from the shutdown of the Silicon Valley Bank (SVB) on Friday, March 10. Circle has recently confirmed that it has $3.3 billion, of its total $40 billion in USDC reserves, with SVB.

As a result, the Circle stablecoin is seen drifting from its Dollar peg as investors move for heavy redemptions. On Friday evening New York time, the USDC peg dropped to $0.9850. Noelle Acheson, the former head of market insights at Genesis Trading, said that the “uncharacteristically high volatility” in the USDC price clearly reflects investors’ concerns. Speaking to Bloomberg, Noelle further added:

“Tether’s USDT, on the other hand, is heading up as traders rotate positions. In yet another example of how weird markets are right now, it is astonishing to see USDT act more like the ‘safe’ stablecoin.”

Tether’s chief technical officer (CTO) Paolo Ardoino has also confirmed that they don’t have any exposure to SVB. This makes USDT look like a safe haven for crypto investors as of now.

Coinbase Suspends USDC: USD Conversions

Amid the ultra-high volatility currently in the USDC stablecoin, crypto exchange Coinbase has announced the decision of suspending USDC: USD conversions for the weekend. In its latest Twitter post, Binance wrote:

We are 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. Your assets remain safe & available for on-chain sends.

Other top crypto exchanges like Binance have also initiated similar measures. Citing current market conditions, Binance has suspended the auto-conversions from USDC to BUSD.

It noted: “Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion. This is a normal risk-management procedural step to take while we monitor the situation”.

As per the latest data, investors have cashed out nearly $8 billion worth of USDC from centralized exchanges over the last 24 hours. It will be interesting to see the impact further with big exchanges suspending conversions.