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Economy

Cryptocurrency chaos: Silicon Valley Bank collapse triggers USDC crash

2023-03-12

[GEO.TV] The cryptocurrency known as USDC, which was believed to be a stable coin, experienced a significant decrease in value after Circle, the company that created it, revealed that it held $3.3 billion in the now-failed Silicon Valley Bank (SVB) and could no longer maintain its peg to the US dollar.

Circle said late Friday it had been unable to withdraw its reserves from SVB, whose sudden collapse rattled financial markets.

The Federal Deposit Insurance Corporation on Friday took over SVB, a major lender to the tech world, in the second-largest bank failure in US history.

SVB is expected to reopen on Monday under a new name, with billions in customer deposits now under FDIC control.

The FDIC guarantees deposits -- but only up to $250,000 per client and per bank.

The agency said Friday it would provide certificates to customers with uninsured funds -- those above the $250,000 limit -- so that they would be the first to receive funds eventually recovered while the bank is in receivership.

But the process of liquidating the bank’s assets can be long, with no certainty of just how much will be recovered.

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

It is listed as the second largest "stable" currency worldwide, based on its volume in circulation (around $40 billion), behind Tether.

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

Overnight Friday to Saturday, the USDC fell to its lowest level ever, dropping to 87 cents before recovering to around 94 cents.

Other stablecoins have also suffered.

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 platform said it was suspending USDC-dollar conversions until Monday, given its exceptionally high activity.

More than $25 billion in USDC had been exchanged on the Coinbase platform in 24 hours, an enormous volume compared to overall holdings.

Meantime, Binance, the largest cryptocurrency transaction 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.

Withdrawal orders from SVB reached a breathtaking $42 billion in a single day on Thursday, according to the Caliphornia, an impregnable bastion of the Democratic Party, Department of Financial Protection and Innovation.

When the bank was unable to honor all those requests, the FDIC stepped in to take control.
That word I'll bet you're looking for right now is "depression."

Posted by:Fred

#9 So... a competitor to paypal?

Posted by: Percy Flotle3938 2023-03-12 21:19

#8 So... a competitor to paypal?

Posted by: Percy Flotle3938 2023-03-12 21:18

#7 Accountant. I need more coffee, the time change messes me up.

Posted by: Deacon Blues 2023-03-12 17:56

#6 A very close friend lost her job on March 2nd because the bitcoin company she worked for was raided by the FBI. They raided the owner's home and the home of his attorney. Seems they had a bunch of unlicensed kiosks in Ohio and were keeping this operation off the books. She was an account but had no knowledge of the illicit kiosks. Thank God she is in the clear. Now we are in the same unemployed boat.

Posted by: Deacon Blues 2023-03-12 17:53

#5 I loved Chris Whalen's recent comment that crypto shouldn't be "dignified" by regulation but should be handled by the state's gaming commission.

Posted by: DooDahMan 2023-03-12 11:14

#4 Warren Buffet (I'm no friend) called derivatives "financial instruments of mass destruction." He was not wrong.

Cybermoney is financial neutron bomb.

Posted by: M. Murcek 2023-03-12 11:06

#3 As for Tether: "The Wall Street Journal said Friday that the stablecoin issuer and its partner exchange Bitfinex falsified documents and opened accounts under different names in a bid to gain access to the global banking system... Tether and Bitfinex turned to false documents and shell companies after Wells Fargo stopped processing transactions from its Taiwanese bank account in 2017, the report said."

Tether is a key player in crypto because of its USDT stablecoin, which traders turn to as a place to park their cash in times of high volatility because its value is fixed at $1.

Posted by: Slavising Unineting5672 2023-03-12 10:59

#2 Now Elon Musk says he's 'open to the idea' of buying crisis-hit Silicon Valley Bank and turning Twitter into a digital bank

Posted by: Skidmark 2023-03-12 10:04

#1 Deep dive on SVB issues

https://www.2ndsmartestguyintheworld.com/p/long-and-variable-lags

Posted by: Slenter Panda4300 2023-03-12 06:05

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