Circle, a cryptocurrency firm that founded the USD Coin (USDC) stablecoin with Coinbase in 2018, has informed its trading partners that its outstanding USDC transactions through the Signet network of Signature Bank will be delayed until Monday. In a note sent to its customers, Circle stated that the Signet system, which facilitates real-time payments for commercial customers, will be processing the delayed transactions when normal banking hours resume. The company did not respond to requests for comment on the matter.
The delayed processing of USDC transactions may explain why premiums on exchanges such as Coinbase, following a flight from USDC, have not been arbitraged away due to USDC order books merging with USD. This has been a cause for concern for crypto traders who have been witnessing USDC losing its peg to the US dollar. The stablecoin dropped as low as $0.88 overnight following the collapse of Silicon Valley Bank.
Circle announced on Friday that $3.3b of its reserves supporting USDC were stuck with the failed bank, triggering the decline in USDC’s value. As of the time of this writing, Circle has confirmed that it had exposure to the bank, but it is unclear how much or how this will affect Circle’s operations going forward.
The announcement follows last week’s news that Silvergate Bank voluntarily liquidated and wound down operations, leaving Signature Bank as one of the few remaining US crypto-friendly banks. The collapse of another banking partner dealing with cryptocurrencies is an alarming development for the crypto community, raising questions about the long-term sustainability of such transactions.
The loss of USDC’s peg to the US dollar overnight highlights the importance of transparency in the crypto industry. Circle has been criticized for its lack of transparency regarding its exposure to Silicon Valley Bank, and the delay in processing USDC transactions only serves to add to these criticisms. It is important for crypto firms to be transparent about any potential issues that may arise so that their customers can be adequately informed of any disruptions to transactions.
The delay in processing USDC transactions is also a reminder that, despite the growing popularity of cryptocurrencies, the industry still faces significant challenges in terms of scalability, transaction speed and cost. The Signet system, for example, is facing a delay due to its capacity threshold being reached. This raises concerns about how crypto transactions could be scaled to meet the requirements of a mass market, without being hampered by delays or high costs.
However, despite these challenges, the crypto industry still shows great promise. As regulators and institutional investors begin to take a greater interest in the sector, the underlying technology behind cryptocurrencies, such as blockchain, has the potential to revolutionize industries beyond financial services.
Issues such as the delay in processing USDC transactions serve to highlight the need for continued development and innovation within the crypto space. As more resources are directed towards improving the scalability, speed and cost-effectiveness of crypto transactions, the industry will become increasingly accessible and attractive to a wider range of customers.
In conclusion, the delay in processing USDC transactions serves as a reminder of the importance of transparency and scalability in the crypto industry. It also highlights the need for continued innovation and development to make crypto transactions faster, cheaper and more reliable. While the collapse of a banking partner dealing in cryptocurrencies may raise concerns about the sustainability of the industry, the underlying technology behind cryptocurrencies still presents an exciting opportunity for innovation and disruption.
