Binance Halts Auto-Conversion of USDC to BUSD Amid Market Turmoil

By 0xGorki 03/11/23 2:47 AM

Binance has announced the temporary suspension of auto-conversion of USDC to BUSD due to market conditions. In a tweet, the exchange stated that the decision was made in response to high inflows and the increasing burden to support the conversion. The move is a standard risk-management procedure, and Binance will continue to monitor the situation.

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.

This is a normal risk-management procedural step to take while we monitor the situation.

— Binance (@binance) March 11, 2023

The announcement came after USDC, a stablecoin pegged to the US dollar, fell by 0.8% in 24 hours. The decline was attributed to the bankruptcy of Silicon Valley Bank (SVB), one of six banking partners used by Circle to manage the cash reserves of USDC. While Circle did not disclose the exact amount of reserves in SVB, the impact of the bank’s receivership was felt by USDC, leading to a significant drop in the USDC/USDT trading pair on OKX to $0.973, while the BUSD/USDT trading pair on Binance saw a drop to $0.9873.

According to a recent report by AZCoin News, there has been a significant outflow of USDC from centralized exchanges in the past 24 hours. Wallets holding USDC have withdrawn a total of $68 million from exchanges, while funds and market makers like Genesis Trading, Wintermute, and Jump Trading have also withdrawn around $79 million worth of USDC.

Overall, USDC withdrawals from centralized exchanges in the past 24 hours amounted to approximately $920 million, and over the past seven days, a total of $30 billion worth of USDC has been withdrawn from exchanges.

The news highlights the challenges faced by stablecoins, which are designed to maintain a stable value relative to a particular asset or basket of assets. Stablecoins have become popular in recent years as a way to facilitate cryptocurrency trading and provide a hedge against market volatility. However, the recent events with USDC have raised questions about the stability of these coins and their underlying assets.

The situation also underscores the importance of transparency and accountability in the cryptocurrency industry. As more people and institutions enter the space, it is essential to have clear standards and regulations to protect investors and prevent market manipulation. The recent developments with USDC and SVB serve as a reminder that even stablecoins, which are supposed to be low-risk assets, are not immune to market turbulence and uncertainty.

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