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Crypto exchanges mum on abrupt stablecoin deposits halt

Illustration of the eyes emoji with two coins with the letter s in it for pupils.

Illustration: Brendan Lynch/Axios

Yesterday, Binance and OKX suspended deposits in Circle (USDC) and Tether (USDT) stablecoins based on the Solana blockchain in a confusing display of crypto exchange operations.

Why it matters: The top two dollar-pegged stablecoins by market capitalization are listed on dozens of exchanges, but the sudden, inexplicable actions taken by a few of those exchanges raises the question of how stable the Solana ecosystem is.

Details: Beyond the notices of the suspension, the exchanges said little more to explain the reason for the sudden move.

  • “Just extra mitigation of risk in the chain,” Lennix Lai, director of financial markets at OKX, told Axios.

Between the lines: The suspension of support for the two top Solana-based stablecoins was widely noticed with the announcement of Binance, but the first to act was Crypto.com, when the exchange stopped them last week in the chaos of FTX’s relaxation.

  • Crypto.com’s chief said withdrawals have generally resumed.
  • Victoria Davis, Crypto.com’s VP of corporate communications, later explained to Axios in an email: “We have temporarily disabled the ability to withdraw or deposit USDT and USDC via the Solana protocol due to Solana- network conditions and the risk posed by the significant role of FTX as a Solana-based stablecoin bridge and trading venue.”
  • Binance resumed deposits for USDT yesterday, “after internal assessment and review.” A Binance spokesperson pointed Axios to that post when asked about USDT and USDC. No word yet on USDC.
  • OKX posted a message on its website yesterday saying that it will remove those tokens at 03:00 UTC or 22:00 ET. It has updated the message to say that support for deposits and withdrawals will be discontinued. (It’s effectively the same thing, but with less harsh phrasing.)

What they say: If there was an FTX-related angle to the move, it wasn’t obvious: “Is there an angle to Alameda that I don’t understand that’s causing the delistings?” Twitter user @cmsholdings asked.

  • Circle CEO Jeremy Allaire responded: “Not clear what the motivations are for exchanges, which is disappointing.”
  • Circle spokeswoman Rachel Busch tells Axios that the USDC originally issued on Solana is “functioning just fine.”

What others say: Kraken backs Solana-based USDC, the exchange’s Bill King tweeted yesterday.

Context: FTX contamination quickly spread to the Solana ecosystem, due to the leadership role of FTX founder and former CEO Sam Bankman-Fried (SBF) in that community.

The plot: If Circle poses any risk, exchanges may have reason to check things out.

  • Some alarm bells rang when the return on Circle’s Earn product showed zero on Wednesday; archived web pages showed a return of 0.25% on it the previous day.
  • The change appeared to coincide with Genesis Global’s crypto lending unit announcing it would halt customer withdrawals and loans, prompting the Winklevoss twins’ exchange Gemini to suspend its yield-earning Earn product.
  • “Circle chose to change the yield from 0.25% yield to 0% before Genesis closed their lines of credit,” said Busch, the spokesperson for Circle. “Circle Yield has historically been driven by demand to borrow in crypto-capital markets.”

What we watch: Circle will report third-quarter earnings in a few days.

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