The failure of three major crypto-backing banks, Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank caused the stablecoin (USDC) to fall to as low as $0.87 from its $1 benchmark.
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Amid the concern mounting around stablecoins, Binance CEO and co-founder Changpeng (CZ) Zhao tweeted on March 13 that with the “changes in stablecoins and banks,” it will be converting the remaining $1 billion funds in its Industry Recovery Initiative into “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 cryptos listed by CZ included Bitcoin (BTC), Binance Coin (BNB) and Ethereum (ETH). He then posted links to the transaction hash ID for the BTC and the ETC and said $980 million took 15 seconds to move with a $1.98 transaction fee.
In response to the move by the Binance co-founder the crypto community on Twitter had mixed responses. 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 BUSD, which is supposed to be a stablecoin, and convert it into more “volatile” assets.
On March 10 Circle, the company behind USDC, disclosed that it has around $3.3 billion tied up at the failing SVB, which caused the initial depegging event. However, by March 13, USDC had bounced back towards its $1 peg, to where it currently hovers around $0.99.
Related: Breaking: Silicon Valley Bank UK arm acquired by HSBC for one pound
It is known that Circle also has an undisclosed amount of reserve funds stuck in Silvergate, another U.S.-based crypto-friendly bank that has just gone bankrupt.
The instability surrounding USDC caused a domino effect on other stablecoins such as DAI, USDD and FRAX, which also slipped away from their $1 position.
Since the events began unfolding on March 10, the entire crypto space has been on edge as to what will happen next. Users in the Twitter community have made claims that there is “nobody left to bank crypto companies.”