On March 10, Blockchain payment tech company and USD Coin (USDC) issuers Circle confirmed that wires initiated on Thursday to remove balances have not yet been processed, leaving $3.3 billion of its $40 billion USDC reserves at Silicon Valley Bank (SVB).
Concerns have been growing over USDC late this week due Circle disclosing in its latest audit that as of Jan. 31, $8.6 billion, or roughly 20% of its reserves was held up in several financial institutions including Silvergate, and Silicon Valley Bank (SVB).
In a bid to provide transparency on the matter, Circle disclosed via Twitter on March 10 that:
“Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.”
Circle said it is now joining other customers and depositors in calling for the continuity of SVB, which the company alleged is important for the U.S. economy. Circle stated on Twitter that it will follow guidance provided by state and Federal regulators.
2/ Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow guidance provided by state and Federal regulators.
— Circle (@circle) March 11, 2023
Circle
Notably, prior to the announcement USDC was sitting below its $1-peg at $0.98 as per CoinGecko data, however promptly after, the price has dropped significantly to $0.93 at the time of writing.
The statement followed news that Silicon Valley Bank, a major financial institution for venture-backed companies, was shut down by California’s financial watchdog, making it the first Federal Deposit Insurance Corporation-insured bank to fail in 2023.
Although the exact reason for the closure remains unclear, the California regulator appointed the FDIC as the receiver to protect insured deposits. SVB, one of the United States’ 20 largest banks by total assets, provided financial services to several crypto-focused venture firms, including Andreessen Horowitz and Sequoia.
Coinbase and Binance pause USDC conversions
Adding to the USDC related woes, roughly 30 minutes after Circle’s latest statement, Coinbase announced that it is “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,” the firm stated.
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
Such a move highlights the difficulty that centralized crypto companies are facing now that Silvergate is longer providing them with round the clock banking services.
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