Cryptocurrency Market Shaken by Failure of Silicon Valley Bank

Published:

USD Coin is ranked as the second most popular “stable” currency.

New York:

The cryptocurrency market has been shaken by the failure of Silicon Valley Bank, which has caused the supposedly “stable” USD Coin to plunge to its lowest level ever.

Circle, the firm behind the USDC, announced that it had been unable to withdraw its reserves from SVB, whose abrupt collapse has sent ripples through the financial system.

The Federal Deposit Insurance Corporation moved in on Friday to take control of the bank and guarantee deposits — up to $250,000 per individual and per bank.

The agency said it would issue certificates to customers with uninsured funds — those in excess of the $250,000 limit — so they can be the first to receive any money recovered while the bank is in receivership.

Yet the liquidation process could take a long time, and it is not certain how much of the funds will be recovered.

The USD Coin, or USDC, was launched in 2018 as a “stablecoin,” meaning it was pegged to a currency backed by a central bank, in this case the US dollar.

It is ranked as the second most popular “stable” currency, based on its circulation volume (around $40 billion), behind Tether.

Stablecoins are meant to be backed by equal reserves in immediately available assets, either cash or readily convertible financial securities.

But overnight Friday to Saturday, the USDC dropped to 87 cents before recovering to around 94 cents.

The Dai, the fourth-largest stablecoin by volume in circulation, fell to 95 cents, while the Frax (sixth largest) fell to 94 cents, its lowest ever.

The Coinbase cryptocurrency exchange said it was suspending USDC-dollar conversions until Monday, citing the exceptionally high activity.

More than $25 billion in USDC had been exchanged on the Coinbase platform in 24 hours, a huge sum compared to its total holdings.

Meanwhile, Binance, the biggest cryptocurrency trading site, said it was suspending conversions of USDC into BUSD — Binance USD, the platform’s own “stable” currency.

“Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the US economy and will follow guidance provided by state and Federal regulators,” Circle said in a statement.

On Thursday alone, withdrawal orders from SVB totaled an astonishing $42 billion, according to the California Department of Financial Protection and Innovation.

When the bank was unable to meet all those requests, the FDIC stepped in to take control.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

The OG Goddess Zeenat Aman Walks LFW Ramp – Everyone Else Can Go Home

Related articles

Recent articles