Coinbase’s announcement of a temporary pause on USDC stablecoin and US dollar conversions has sent shockwaves throughout the crypto industry. The pause came due to Silicon Valley Bank’s (SVB) closure, which has also had significant implications for Circle’s USDC stablecoin, media reports said.
Circle had confirmed earlier that $3.3 billion of its stablecoin’s backing was at SVB, which the FDIC has now seized. As a result, USDC has lost its dollar peg, causing traders to redeem $1.6 billion of the stablecoin and lowering its whole supply.
The chaos caused by SVB’s collapse has led many to speculate on the cryptocurrency market’s future. Some fear this event may begin a dark phase for the industry, similar to the 2008 global financial crisis. This is particularly concerning because the crypto market lacks a central bank that can bail it out in times of crisis.
However, some in the industry are looking for creative solutions to the problem. For example, Razer CEO Min-Liang Tan has suggested that Twitter acquire SVB and transform it into a digital bank. Elon Musk has also expressed interest in this option, although its feasibility is yet to be determined.
Meanwhile, Circle is working to protect USDC from a highly improbable and catastrophic failure in the US banking system. Dante Disparte, Circle’s Chief Strategy Officer, warned that SVB’s failure would have higher implications for banking, business, and entrepreneurs without a Federal rescue plan.
