Coinbase suspending USDC:USD conversions over the weekend

USDC is managed the Centre consortium, which was founded by Circle and includes Coinbase as a member.<p>Circle held around $3.3 billion in Silicon Valley Bank, leading to a run on USDC which resulted in it trading for as little as $0.95 on some exchanges today (Mar 10, 2023). This represents around 30% of USDC&#x27;s cash reserves and 7% of its total reserves. The balance of reserves are held in T-Bills, which are liquid and typically can only be traded during market hours. Coinbase itself has around $2B of USDC on hand. Circle&#x27;s rumored exposure to Silvergate&#x27;s collapse is also a concern.<p>If more than $7.8B of USDC were to be liquidated over the weekend, USDC would be effectively insolvent. Freezing trades until the market reopens limits this. USDC should rapidly stabilize due to being backed by very liquid hard assets, but it will probably lose significant marketshare to Tether.<p>UPDATE: USDC Liquidity pools on other exchanges are becoming completely drained, pulling down the peg. <a href="https:&#x2F;&#x2F;www.reddit.com&#x2F;r&#x2F;CryptoCurrency&#x2F;comments&#x2F;11oaz39&#x2F;coinbase_just_suspended_selling_usd_coin_massive" rel="nofollow">https:&#x2F;&#x2F;www.reddit.com&#x2F;r&#x2F;CryptoCurrency&#x2F;comments&#x2F;11oaz39&#x2F;coi...</a>

So USDC is currently trading at $0.93. Which, if you believe in Coinbase, is free money. And if you don&#x27;t, then its very bad news for the company and possibly worse news for the banks that are keeping the USDC reserves, because they are about to have a massive bank run on monday.<p><a href="https:&#x2F;&#x2F;coinmarketcap.com&#x2F;currencies&#x2F;usd-coin&#x2F;" rel="nofollow">https:&#x2F;&#x2F;coinmarketcap.com&#x2F;currencies&#x2F;usd-coin&#x2F;</a>

That’s kind of amusing. By using a traditional bank to store their gold standard bullion, they had exposure to centralized banking risk, which was realized, and caused the crypto to get locked in.<p>It’s like some sort of wacky deadlock condition.

Coinbase recently &quot;unified&quot; USD and USDC on Coinbase Exchange, trying to pretend they are the same thing. Absolutely boneheaded move. I expected it to cause problems for them eventually, but I&#x27;m surprised it was so soon...

So many people were expecting it would be BUSD that would de-peg, and now it&#x27;s USDC, which was considered to be among the safest and safest from regulatory pressure. Goes to show how the consensus is often wrong and how hard these things are to predict.

Tether, the Sauron of stablecoins, has zero exposure to SVB and is holding the peg just fine. Sorry Patio and friends, maybe next time :)

Crypto was supposed to liberate you from the traditional banksters. Instead it’s an impenetrable smokescreen where you’ve got uninsured credit risk with institutions in Silicon Valley and the Bahamas and who knows where, and you won’t know until the edifice cracks and your money is stuck. Not a terrific improvement.<p>Of course the Bitcoin maximalists will shake their heads, mutter about self-custody, and then go on conducting their actual finances in dirty fiat because Bitcoin is nearly impossible to use for anything that people actually want to do.

Not just that, but if you did convert to USD earlier today, they won&#x27;t let you withdraw.

&quot;With crypto, transferring funds is fast and easy!&quot;

I wonder how banks being closed is impacting Coinbase&#x27;s willingness&#x2F;ability to redeem USDC for USD.<p>Since Coinbase can (at least in the US, to my knowledge) also not transfer any USD out on the weekend, shouldn&#x27;t it be risk-free to take on any USD liability over the weekend, at least when considering USDC itself risk-free?

So, another “stablecoin” showing up to be not stable?<p>How many of them need to fail before it is clear this is not a viable mechanism?

Is the only way to make a true stablecoin is to create your own bank to hold the assets of the stablecoin?<p>The problem is a stablecoin holds reserves in a bank which the bank is then investing in non liquid assets which puts you in the current predicament. On paper USDC had these cash reserves, but in reality if you follow the trail all the way down you find out that those cash reserves are actually MBS’s and 10 year bonds.<p>A stablecoin which operated it’s own bank could guarantee that all reserves are actually being held in cash ready to wire transfer at a moments notice.

Haha, after a decade of FUD, turns out USDT were more cautious and diligent with their funds, than the &quot;regulated and transparent&quot; USDC. Still risky, of course. No substitute to holding proper BTC.

Even if USDC eventually manages to regain the peg, it seems likely this will cause major long term damage to adoption. Who wants to hold a &quot;stablecoin&quot; that can sit at a 7+% discount to par for over a day?

Seriously, just a tweet? Not even press release, let alone Q and A for breaking one of the core promises of the company. While I still think the deposits are safe, Coinbase should outline their worst case plan on this.

There&#x27;s something wild here. There could be a run on this instrument and nobody could help. Systemic risk screams out here

How to know if Coinbase invested in long term bonds last year?<p>In the balance sheet a cannot find the unrealized loss

Boom!

BTC crashed, stable coins crashing . Financialization means new, unforeseen risks are constantly showing themselves due to the intricacy of the interconnected system. Failure of stable coins will probably lead to sub 10k $btc for sure. Already BTC crashing now on this news after an attempt to rally. FTX was just $20 billion, stable coins combined are $150 billion....

Startup A had 10M in SVB. Startup B had 10M in USDC.<p>Startup A is probably closing down, let&#x27;s hope not and wait until Monday for a bailout.<p>Startup B cut losses and walked away with ~9.2M, on a weekend.<p>There is something to learn here about counterparty risk and outdated regulations&#x2F;legislations. SVB from a time when no credit cards existed, USDC from a world where the iPhone had already been invented.

I think Stablecoins systems are more resilient than traditional banks in bank runs.<p>In Case of a traditional Bank Run (SVB), pulling the money out is the overwhelmingly best thing to do due to game theory logic. This means once a bank run starts, there&#x27;s no stopping it.<p>But in Stablecoins, the coin &quot;depegs&quot;, this gives people a reason to actually buy and support the coin if they think insolvency won&#x27;t happen.

Circle&#x2F;USDC fooked around Paxos&#x2F;BUSD and now they are finding out. All the xenophobia towards Binance showed who the real ones are. CZ is Canadian too and grew up there.