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An Update on USDC and Silicon Valley Bank

circle.com

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Re: An Update on USDC and Silicon Valley Bank

#101

Post by renewiltord »

braingenious wrote: post #56

I’m not very knowledgeable on this topic, so I have a legit question about all of this: How is pausing withdrawals not blatant currency manipulation? If I had USDC and lost all faith in it yesterday, shouldn’t I be allowed to cash out today? Also, if they’ve got many billions in cash, why would losing access to a sliver of it justify shutting down withdrawals? “Trust us, it’s worth a dollar! Or don’t trust us! It doe…

Beats me, but JP Morgan Chase has paused withdrawals for me too. They say "You have reached your daily $5000 ATM withdrawal limit" and "Bank hours are 9 AM to 5 PM Monday through Friday".

"Trust us, you can withdraw your money! Or don't trust us! It doesn't matter because you have no choice but to look at your bank balance until we deem it advantageous to allow you to withdraw to real money!"

Re: An Update on USDC and Silicon Valley Bank

#102

Post by latchkey »

saurik wrote: post #64
tempsy wrote: post #52

Earlier quoted context omitted.

that’s if you have a Circle account which effectively no individual has access to. if you convert USDC to USD on Coinbase or another exchange you’re paying the market rate

Coinbase actually does it 1:1 by proxy from Circle: you don't have to "trade" USDC-USD. They aren't right now, but they normally go above and beyond by being willing to do it on weekends, while Circle itself only operates on weekdays, and they don't want to stake their own fate towards that, so they said they are pausing doing that until Monday.

Not only that, but if coinbase catches you doing this, they will immediately lock your account.

Re: An Update on USDC and Silicon Valley Bank

#103

Post by patrickaljord »

WalterSear wrote: post #38
echelon wrote: post #29

Earlier quoted context omitted.

The creators of USDC could destroy their own coins to restore the 1:1 reserve peg. I doubt they'd do it, but it would immediately restore confidence. Send them to a null address or commit to burning them in software. If they can restore the reserve, they could remint them. I'm a crypto bear (with modest crypto holdings for diversification), and I think this is an opportunity for these folks to step up to the plate an…

IMHO, they are justifiably confident that this will all blow over in a few days, and that their deposits will be available to them soon after, albeit with a few percent missing. But I concur - they are showing their true colors by not defending the peg.

it's not their job to defend the peg on the open market (not to mention impossible by definition), their only product is the possibility to redeem each USDC for $1 through a circle account. We will see on Monday if they can deliver.

Re: An Update on USDC and Silicon Valley Bank

#104

Post by lxgr »

wmf wrote: post #100
yunohn wrote: post #94

> redemption is constrained by the working hours of the U.S. banking system Why do they keep saying this? This should’ve always been the case, regardless of SVB’s collapse. Seems more like a non sequitur to cover for an actual issue.

Some people are saying "gotcha! you can't redeem" as if that's a real problem and Circle is clarifying that you could never redeem on the weekend.

But something must be different this weekend compared to all the ones before, at least at Coinbase: https://news.ycombinator.com/item?id=35105039

Re: An Update on USDC and Silicon Valley Bank

#105

Post by latchkey »

mdasen wrote: post #80
bhaak wrote: post #11

Earlier quoted context omitted.

The peg is held up by the belief that you can always get 1 USD for 1 USDC. Obviously the market had some doubts about this today and then liquidity issues drove the price down. I'm somewhat surprised that it climbed back up this fast which means that the panic seems to be over (for the moment).

That means it's not really a peg. If you have a peg, it means that the currency issuer is willing to buy their currency for a set amount. Right now, Circle isn't willing to buy USDC for $1 USD - therefore, there is no peg. Or maybe what we're talking about is a broken peg. Circle was willing to pay $1 USD for a USDC, but they're no longer willing to pay that (at least temporarily). Maybe countries have seen their peg…

> Right now, Circle isn't willing to buy USDC for $1 USD

https://www.circle.com/blog/an-update-on-usdc-and-silicon-va...

Re: An Update on USDC and Silicon Valley Bank

#106

Post by nightmarish »

braingenious wrote: post #84
nevi-me wrote: post #68

Earlier quoted context omitted.

One could ask whether halting trading of a stock is manipulation or not. Some risks arise mostly out of urgency, and not having countermeasures could have catastrophic results which otherwise would have been avoided by pausing the process. If Circle were operating as a fractional reserve bank where it borrowed from you by virtue of a positive bank balance, lent me 80% of that, and only kept 20%; pausing honouring wit…

>If my pastry shop runs out of already baked goods during the AM peak If your pastry shop had 40 billion donuts, and you claim that 10 billion of those donuts are available for sale immediately, do you close your shop when you lose 3.3 billion of them, leaving you with only 6.7 billion donuts that are still sitting there?

Yea because it’s way better for the customers to believe the illusion that I have 40 billion than to find out I only had let’s say… 5

Re: An Update on USDC and Silicon Valley Bank

#107

Post by latchkey »

Macha wrote: post #86
mdasen wrote: post #80

Earlier quoted context omitted.

That means it's not really a peg. If you have a peg, it means that the currency issuer is willing to buy their currency for a set amount. Right now, Circle isn't willing to buy USDC for $1 USD - therefore, there is no peg. Or maybe what we're talking about is a broken peg. Circle was willing to pay $1 USD for a USDC, but they're no longer willing to pay that (at least temporarily). Maybe countries have seen their peg…

As far as I can tell, Circle is still willing to buy 1 USDC for 1 USD during business hours, which has always been Circle's policy. What has changed is that third parties no longer have sufficient faith in that to extend the offer to 24/7. e.g. before Coinbase would give you USD for your USDC on Saturday morning because they were happy enough that they could take the USDC back to Circle and exchange into USD on Monda…

There is a nice arbitrage opportunity, that's why Coinbase shut down this weekend.

Re: An Update on USDC and Silicon Valley Bank

#108

Post by everfree »

latchkey wrote: post #102
saurik wrote: post #64

Earlier quoted context omitted.

Coinbase actually does it 1:1 by proxy from Circle: you don't have to "trade" USDC-USD. They aren't right now, but they normally go above and beyond by being willing to do it on weekends, while Circle itself only operates on weekdays, and they don't want to stake their own fate towards that, so they said they are pausing doing that until Monday.

Not only that, but if coinbase catches you doing this, they will immediately lock your account.

If they catch you doing what?

Re: An Update on USDC and Silicon Valley Bank

#110

Post by everfree »

braingenious wrote: post #83
323 wrote: post #69

Earlier quoted context omitted.

They didn't pause anything. The US banks did, by not working in the weekend (for large sums). If you had 1 billion USD with your favorite US bank, that would be paused too right now.

I’m hearing that you can’t even use USDC to exchange for bitcoin/ETH on Coinbase right now. What does converting between types of crypto have to do with banks? Those transactions should in theory have nothing to do with a banking transaction. It seems like they’re simply forcing people to hold USDC, full stop, and are blaming banks for their decision to do so.

For better or worse, Coinbase does not have a USDC/USD trading pair, or USDC trading pairs with most cryptos (BTC, ETH, etc.). For the most part they have USD trading pairs, which if you have USDC you're typically expected to access by redeeming your USDC for USD and then using the USD trading pairs. But since USDC to USD redemption is halted for now, you effectively cannot trade USDC for most common cryptocurrencies on Coinbase without going through one of their (afaik) three live USDC trading pairs - USDC/EUR, USDC/GBP, and USDT/USDC.

However, other exchanges actually do have USDC markets for most other cryptocurrencies. If you deposit your USDC with them, then you can directly trade order books on USDC/USD, BTC/USDC, and ETH/USDC, which function regardless of the lack of redemption and regardless of the actual market price of USDC.

If Coinbase had lots of USDC trading pairs like other exchanges do, it would avoid the issue you outlined in your comment, but it would also fragment liquidity across two markets that are effectively identical during business-as-usual periods where redemptions function properly.

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