The collapse of three major crypto-friendly banks Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank has caused the U.S. Dollar Coin (USDC) stablecoin to drop from its $1 peg to $0.87.
Amid growing concerns surrounding stablecoins, Binance co-founder and CEO Changpeng “CZ” Zhao tweeted on March 13 that the exchange will Convert the remaining $1 billion of its industry recovery plan into a “native cryptocurrency.” The native cryptocurrencies listed by CZ include Bitcoin (BTC), BNB (BNB), and Ether (ETH). He then posted links to the hash IDs of the BTC and ETH transactions, saying the $980 million was transferred in 15 seconds with a transaction fee of $1.98.
Crypto Twitter had mixed reactions to the Binance co-founder's move. Some praised the decision, calling it “pure gold” and suggesting alternative currencies pegged to the stablecoin: Others, however, questioned the move to sell the Binance Dollar (BUSD) stablecoin and switch the fund into more “volatile” assets.
On March 10, Circle, the company behind USDC, revealed that it had roughly $3.3 billion tied up with the failed SVB, which led to the initial decoupling event. However, by March 13, USDC had bounced back to the $1 peg currently hovering around $0.99. Circle also has an undisclosed amount of reserves in Silvergate, another bankrupt U.S. crypto-friendly bank.
The instability surrounding USDC had a domino effect on other stablecoins like Dai (DAI), USDD and FRAX, which also slipped from their $1 peg. Since events began to unfold on March 10, the crypto space has been tense about what's next. The Twitter user claimed that "no one can bank a cryptocurrency company".
