As per Binance notification on twitter, 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.
USDC( Circle) is in the center of the hot-seat due to the Silicon Valley Bank meltdown. Circle had around 9.2 billion $ worth exposure to Silicon Valley Bank as per the audit document from Deloitte dated Jan 17th 2023. This is discussed more in this content on CNB few hours ago ” Circle’s USDC Stablecoin’s Cash Reserves at Failed Silicon Valley Bank” If Circle still had same of higher amount of exposure to Silicon Valley Bank, Circle’s USDC may be in trouble at this point and they may have to start finding investors to back the required amount in my opinion.
What is Binance suspending USDC to BUSD ?
Investors see the potential risk because of Circle’s affiliation to Silicoin Valley Bank. Hence they are moving their USDC to fiat or to other stablecoins such as BUSD to avoid loosing their net-worth similar to Luna’s UST meltdown. While Binance can benefit from this move but due to the ongoing regulatory case( Links towards the end of article), Binance may be playing safe in this case. Of course this is an opinion and we will have to see how this pans out in the next few days.
Coinbase removal of BUSD :
Coinbase announced last week that it plans to suspend BUSD ( Binance USD) on March 13, 2023 for not meeting their listing standards. After today’s meltdown, USDC has a lot of questions to answer before investors pull money out to USDC which was considered one of the best stablecoins out there.
Conclusion
While this is temporary or revenge, the risk remains with USDC stablecoin till Circle provides a clarification to the Deloitte document about the exposure to Silicon Valley Bank.
Image – Andrey Rudakov/Bloomberg via Getty Images
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