Changpeng Zhao’s Response to USDC Depegging and the Role of Banks
The 2022 bear market was one of the hardest in the history of crypto, with so many big industry names biting the dust.
Last year we witnessed something similar to a domino effect, starting with the collapse of Terra (LUNA) and the stablecoin UST, which led to the demise of many companies such as 3AC, Genesis, Celsius, and in the end – FTX.
The UST crash caused billions in losses, which surprised investors and made them feel fear and caution. Then the regulatory authorities shifted their gaze to the industry.
Terra’s failure led Binance CEO Changpeng “CZ” Zhao to suggest that traditional banks pose a risk to stablecoins typically pegged 1:1 to fiat currencies, such as the U.S. dollar, following the recent depegging of Circle’s USD Coin (USDC).
Yesterday Circle announced that Silicon Valley Bank (SVB) did not process its $3.3 billion withdrawal request, which prompted the crypto market to sell off its USDC holdings, leading to the stablecoin’s loss of its peg.
CZ blamed banks like SVB for increasing the risks to stablecoins by being directly involved in destabilizing USDC prices.
The Binance CEO cited Do Kwon’s failed launch of an algorithmic stablecoin, stating:
“Do Kwon actually had the right idea but just failed miserably on execution.”
Some investors foresaw the possibility of USDC de-pegging and sold their holdings to avoid losses. The price of USDC fell below $0.9 after the sell-off but is currently regaining its stability.
At the time of writing USDC’s price is $0.96, with a market cap of $39.25 billion and a $12.55 billion trading volume in the past 24 hours.