Late on Friday, Coinbase (COIN) put a stop to trade between USDC stablecoin and US dollars as the effects of Silicon Valley Bank’s (SIVB) failure reached the center of the cryptocurrency market.
The cryptocurrency exchange tweeted that it was “temporarily suspending” the trades since banks are closed on the weekend, stating that on Monday it will be resumed.
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.
— Coinbase 🛡️ (@coinbase) March 11, 2023
The delay reflects the instability that has captured the second-largest stablecoin in the cryptocurrency market since Silicon Valley Bank’s failure on Friday. Trading firms redeemed $1.6 billion in USDC, reducing the currency’s supply as they speculated on its stability.
In the late afternoon, Circle said that $3.3 billion of the $40 billion supporting its stablecoin was deposited with the now-closed institution. Now that the FDIC and USDC have taken over, Silicon Valley Bank has temporarily lost its currency peg, and the future of that currency is unknown.
Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% 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.https://t.co/NU82jnajjY
— Circle (@circle) March 10, 2023
“Circle is currently protecting USDC from a black swan failure in the U.S. banking system. Silicon Valley Bank is a critical bank in the U.S. economy and its failure – without a Federal rescue plan – will have broader implications for business, banking and entrepreneurs,” said Circle Chief Strategy Officer Dante Disparte late Friday night.
“During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours,” Coinbase tweeted. “When banks open on Monday, we plan to re-commence conversions.”