The failure of three major crypto-friendly banks — Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank — caused the USD Coin (USDC) stablecoin to fall to as low as $0.87 from its $1 peg.
Amid the concern mounting around stablecoins, Binance co-founder and CEO Changpeng “CZ” Zhao tweeted on March 13 that with the “changes in stablecoins and banks,” the exchange will be converting the remaining $1 billion funds in its Industry Recovery Initiative to “native crypto.“
Given the changes in stable coins and banks, #Binance will convert the remaining of the $1 billion Industry Recovery Initiative funds from BUSD to native crypto, including #BTC, #BNB and ETH. Some fund movements will occur on-chain. Transparency.
— CZ Binance (@cz_binance) March 13, 2023
The native cryptocurrencies listed by CZ included Bitcoin (BTC), BNB (BNB) and Ether (ETH). He then posted links to the hash ID for the BTC and ETH transactions, saying $980 million took 15 seconds to move with a $1.98 transaction fee.
In response to the move by the Binance co-founder, Crypto Twitter had mixed reactions. Some praised the decision, calling it “pure gold,” and offered a suggestion to use alternative currencies to peg stablecoins:
This move is pure gold. Crypto power.
– How about diversifying into stables other than pegged to USD?
For now allow major global currencies and maybe integrate with CBDCs to allow seamless integration in the future.
It will help in reaching out to a huge unbanked users.
— Vipul CypherPunk (@vipul19) March 13, 2023
However, others questioned the move to sell the Binance USD (BUSD) stablecoin and convert the fund to more “volatile” assets.
On March 10, Circle, the company behind USDC, disclosed it had around $3.3 billion tied up at the failing SVB, which caused the initial depegging event. However, by March 13, USDC had bounced back toward its $1 peg — currently hovering around $0.99.
Related: Breaking: Silicon Valley Bank UK arm acquired by HSBC for one pound
Circle also has an undisclosed amount of reserve funds stuck in Silvergate, another United States-based crypto-friendly bank that went bankrupt.
The instability surrounding USDC caused a domino effect on other stablecoins such as Dai (DAI), USDD and FRAX, which also slipped from their $1 peg.
Since the events began unfolding on March 10, the crypto space has been on edge as to what will happen next. Twitter users have claimed that there is “nobody left to bank crypto companies.”