Circle stablecoin USDC depegs to under $0.90

USD Coin (USDC/USD) has fallen below $0.90, sharply depegging after Circle confirmed exposure to Silicon Valley Bank. The cryptocurrency news this Saturday also sees major cryptocurrencies, including Bitcoin and Ethereum struggle with selloff pressure near $20,000 and $1,400 respectively.

USDC falls under $0.90

Simply, the stablecoin is falling because Silicon Valley Bank, one of the main banking partners of Circle, is down. It is the largest US bank to collapse since the 2008 financial crisis, and the impact has USDC feeling the heat. Invezz has highlighted just how big SBV was in the finance and banking industry.

All this is after Circle, the company behind USDC revealed it was significantly exposed to the collapsed bank. Specifically, Circle confirmed it had $3.3 billion at the bank as it could not take its balances out in time on Thursday. The impact on the stablecoin has been brutal over the past 24 hours.

At the time of writing, the USD-pegged stablecoin had lost its peg and was trading around $0.88.

While it might not impact the markets as would a collapse of Tether (USDT), crypto investor and analyst Michael van de Poppe commented:

$USDC peg falls beneath $0.90 amid the risk Circle has with holding reserves at Signature Bank and Silicon Valley Bank.

Probably not going to be such an heavy impact to #crypto, but stay safe! pic.twitter.com/l9rJZyYCOw

— Michaël van de Poppe (@CryptoMichNL) March 11, 2023

The events around USDC have seen cryptocurrency exchanges Binance and Coinbase briefly halt conversions involving the stablecoin. Binance announced a temporary halt to auto-conversions from USDC to BUSD.

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.

— Binance (@binance) March 11, 2023

Coinbase said it had paused conversions of USDC:USD, with this in place over the weekend. The exchange will re-enable conversions when banks open on Monday.

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

Silicon Valley Bank collapse

On Thursday, the Silicon Valley Bank became the second largest bank in US history to collapse and on Friday, Circle announced it had failed to remove $3.3 billion in the bank. The money is what Circle holds as reserves for its stablecoin USDC.

It remains to be seen what comes of SVB, but Circle believes its continuity is crucial as it is an “important bank in the US economy.” The USDC issuer noted in a tweet:

“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 also banked with Silvergate Bank and Signature Bank among other crypto-friendly banks.

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