Faced with Circle’s USDC depeg, cryptocurrency platforms Binance and Coinbase have unveiled measures to try to limit selling pressure on the stablecoin. Will these decisions be enough to limit the crisis
Depeg of USDC: Binance and Coinbase play it safe
At present, the USDC is a collateral victim of the US banking panic, and in the face of the loss of its dollar peg, Binance and Coinbase have announced measures.
Firstly, Coinbase said that the USDC/Dollar conversion was suspended for the weekend:
We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.
– Coinbase (@coinbase) March 11, 2023
The reason for this decision is that banks are closed on weekends, and as the USDC is a centralised stablecoin, collateralised by dollar reserves, these players can only clear during the hours that banks are open. In the face of the current volatility, it is therefore a relevant choice that should not aggravate the situation.
Binance has also suspended the automatic conversion of USDC, USDP and TUSD to BUSD, citing a “normal risk management” reason. This too could help ease selling pressure on the troubled stablecoin.
In other news, new trading pairs were unveiled:
Binance will add the following stablecoin spot trading pairs:
BNB/TUSD
BTC/TUSD
ETH/TUSD
TUSD/USDT
USDC/USDT
USDP/USDT– Binance (@binance) March 11, 2023
Thus, conversions between stablecoins at the ratio of one to one can only be done manually, from “Binance Convert”, and this until March 18th at 7am Paris time. However, this conversion can only be done from the BUSD to other stablecoins and not in the opposite direction to discourage arbitrage.
At the time of writing, other major global exchanges such as Kraken, KuCoin, Huobi had not yet announced any action regarding the USDC. However, OKX has called on its users to be cautious in the face of increased market volatility:
Trading risks may increase during the current situation regarding USDC. We’re closely monitoring the situation and will keep our users updated.
Thank you for your patience, and as always: Trade Responsibly!
– OKX (@okx) March 11, 2023
The USDC is thus undergoing a critical test, accentuated by the weekend’s bank closures, trading below $0.9 for the time being. The events of the next few days will be decisive, and should prove the resilience of the centralized stablecoin model.
