Yesterday afternoon, after the equity market close, USD Coin (USDC) issuer Circle revealed that $3.3 billion of its $40 billion reserves were tied up in now-failed Silicon Valley Bank (SVB).

Specifically, on March 9, Circle initiated a wire transfer to remove its funds from SVB as the FDIC-insured bank was about to shut operations. However, two days later, on March 11, Circle confirmed that the wire transfers were not wholly processed, with $3.3 billion of USDC reserves still with SVB.

2/ Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow guidance provided by state and Federal regulators.

— Circle (@circle) March 11, 2023

Almost immediately, leading crypto exchanges Binance and Coinbase both said that they would temporarily suspend USDC conversions as the contagion from the collapse of SVB plays out.

Citing “current market conditions” without naming Silicon Valley Bank, Binance said it has temporarily suspended auto-conversion of USDC to BUSD.

Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion. This is a normal risk-management procedural step to take while we monitor the situation.

— Binance (@binance) March 11, 2023

Coinbase, the largest cryptocurrency exchange in the United States, also said it would suspend USDC conversion to USD while banks are closed over 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

USDC prices fell almost immediately, dramatically breaking the $1 peg, trading as low as 87c to the $1 at one point but currently ‘stabilized’ around 90c.

As CoinTelegraph reports, according to Dante Disparte, the chief strategy officer and head of global policy for Circle, SVB is critical to the United States economy and warned that “its failure – without a federal rescue plan – will have broader implications for business, banking and entrepreneurs.

Crypto investors redeemed more than $2 billion in Circle’s stablecoin in the past 24 hours, according to blockchain data provider Nansen as of 10 p.m. ET on Friday. The pace of USD Coin redemptions accelerated through Friday, with most of the USD Coin burned in the last eight hours, Nansen said.

As WSJ reports, some crypto executives questioned whether Circle has enough assets to cover its liabilities.

David Schwartz, chief technology officer at crypto company Ripple, asked on Twitter in response to a post from Circle.

Paolo Ardoino, chief technology officer of Tether, said the issuer of the world’s largest stablecoin doesn’t have any exposure to Silicon Valley Bank.

Tether has a market cap of around $72 billion, down from $74 billion late Friday, while USD Coin’s market cap is roughly $38 billion, down from about $41 billion, according to data from CoinMarketCap.

Additionally, following USDC’s depegging, the stablecoin ecosystem immediately came under pressure, as DAI, USDD and FRAX also depegged from the U.S. dollar.

Finally, as CoinDesk notes, if SVB customers, including Circle and its USDC stablecoin, are forced to take a haircut on their money, the repercussions are unclear.

In fact, as Colin Wu writes at Substack, USDC’s fate may indeed depend on whether Silicon Valley Bank can be acquired…

So who, if anyone, will step in?

When Razer CEO Min-Liang Tan tweeted late Friday that Twitter should buy SVB and turn into a digital bank, billionaire Elon Musk tweeted in reply, “I’m open to the idea.”