The death spiral of the Terra ecosystem served as a catalyst to the 2022 bear market — causing losses in the billions, damaging investor sentiment and intensifying the regulatory spotlight over cryptocurrencies. However, the recent depegging of Circle’s USD Coin (USDC) led Binance CEO Changpeng “CZ” Zhao to believe that traditional banks are a risk to stablecoins that are usually pegged 1:1 with fiat currencies, like the U.S. dollar.
On March 11, Circle disclosed that Silicon Valley Bank (SVB) did not process its $3.3 billion withdrawal request. The crypto market responded to the revelation by selling off USDC holdings, causing the U.S. dollar-backed stablecoin to lose its peg. Given SVB’s direct involvement in destabilizing USDC prices, CZ blamed banks for increasing the risks to stablecoins.