Illustration: Brendan Lynch/EuroJournal
Binance and OKX yesterday suspended deposits in Circle’s (USDC) and Tether’s (USDT) stablecoins based on the Solana blockchain, in a puzzling 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, unexplained actions taken by a few of those exchanges raise 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 abrupt move.
- “Just extra mitigation of on-chain risk,” Lennix Lai, director of financial markets at OKX, tells EuroJournal.
Between the lines: The suspension of support for the two top Solana-based stablecoins was largely noticed with the announcement from Binance, but the first to take action was Crypto.com, when the exchange halted them last week in the mayhem of FTX’s unwinding.
- Crypto.com’s chief said withdrawals, in general, have resumed.
- Victoria Davis, Crypto.com’s VP of corporate communications, later clarified in an email to EuroJournal, “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 spokesperson for Binance pointed EuroJournal to that post when asked about USDT and USDC. No word yet on USDC.
- OKX posted a message on its website yesterday saying it would delist those tokens at 3am UTC or 10pm ET. It updated the message to say that support for deposits and withdrawals would be halted. (It’s effectively the same thing but with less harsh phrasing.)
What they’re saying: If there was an FTX-related angle for the move, it wasn’t obvious: “Is there some angle to Alameda I don’t understand causing the delistings?” Twitter user @cmsholdings asked.
- Circle CEO Jeremy Allaire responded: “Not clear what the motivations are for exchange actions, which are disappointing.”
- Circle spokesperson Rachel Busch tells EuroJournal that the USDC natively issued on Solana was “functioning fine.”
What others are saying: Kraken supports Solana-based USDC, the exchange’s Bill King tweeted yesterday.
Context: FTX contagion spread to the Solana ecosystem quickly, owing to the leadership role of FTX founder and former CEO Sam Bankman-Fried (SBF) in that community.
The intrigue: If Circle presented any risk, exchanges might have reason to check things out.
- Some alarm bells were raised when the yield on Circle’s Earn product showed zero on Wednesday; archived web pages showed a 0.25% yield on them the day earlier.
- The change seemed to coincide with Genesis Global’s crypto lending unit announcing that it would halt customer withdrawals and loan originations, which led to the Winklevoss twins’ exchange Gemini suspending its yield-earning Earn product.
- “Circle chose to change the yield from 0.25% yield to 0% before Genesis closed their credit lines,” Busch, the spokesperson for Circle, says. “Circle Yield has historically been driven by demand to borrow in crypto capital markets.”
What we’re watching: Circle is set to file third quarter earnings in a few days.