Circle has part of the funds frozen in the bankrupt SVB. USDC detaches from parity with the dollar
USD stable coin (USDC) manager Circle revealed after the stock market close on Friday that $3.3 billion of its $40 billion in reserves were tied up in now-bankrupt Silicon Valley Bank (SVB).
Notably, Circle initiated a wire transfer on March 9 to remove its funds from SVB, as the partially FDIC-insured bank was about to shut down operations. However, two days later on March 11, Circle confirmed that the wires had not fully processed, with $3.3 billion of USDC reserves still at SVB. He basically tried to enter the Bank Run and failed .
2/ 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 (@circle) March 11, 2023
The news led to a strong departure from parity of the stablecoin, now very little "Stable"
Binance, faced with this completely new situation, announced that the automatic conversion of USDC to its stable coin BUSD was blocked.
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
This story highlights once again the problem of managing the reserves of stable coins. If banks can also fail, as they fail, what is the institution that can afford to be the safe custodian of the stablecoin's monetary reserves? A great problem whose solution is by no means simple or obvious.
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Article Circle has part of the funds frozen in the bankrupt SVB. USDC detaches from dollar parity comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/circle-ha-parte-dei-fondi-congelati-nella-fallita-svb-usdc-si-distacca-dalla-parita-col-dollaro/ on Sun, 12 Mar 2023 08:00:32 +0000.