Trading of a prominent cryptocurrency has been halted in the wake of the collapse of Silicon Valley Bank.

After revealing that it had billions of dollars tied up in the now-collapsed Silicon Valley Bank, Circle Internet Financial, the parent company of one of the world’s largest cryptocurrencies, has blocked investors from trading.

The US-based company confirmed that it has $3.3bn (£2.7bn) of reserves trapped with the bank, which was closed by regulators on Friday.

This announcement caused a run on Circle’s USD Coin, the second-largest stablecoin globally, which dropped from its $1 peg and was trading below 87 cents on Saturday morning. While it has since rebounded to 91 cents, it remains below its $1 target, and the fallout is expected to impact the wider crypto market and other virtual currencies.

Circle has a quarter of its USD Coin reserves in cash with six banks, including SVB, and the rest in short-dated US Treasury securities. The company has stated that it and its digital dollar will continue to operate as usual while waiting for more information on SVB’s future.

In response to the collapse of Silicon Valley Bank, Coinbase, the crypto exchange, has temporarily halted conversions of USD coins into dollars while banks are closed over the weekend. The company relies on USD transfers from banks that clear during normal banking hours, and conversions will resume when banks reopen on Monday.

Circle’s Chief Strategy Officer, Dante Disparte, stated on Twitter that the company was safeguarding USD Coin from a “black swan failure in the US banking system.” Disparte further noted that SVB is a critical bank in the US economy, and its failure, without a Federal rescue plan, will have far-reaching implications for businesses, banking, and entrepreneurs.

As SVB customers are primarily tech companies, experts have warned that its collapse will significantly affect startups in both the US and the UK. The Bank of England has announced its plan to place the UK arm of SVB into insolvency, which will lead to a funding crisis for British tech startups.

Silicon Valley Bank had endeavoured to address its balance sheet and raise $2.25bn after incurring losses on investments caused by increasing interest rates. There has been no immediate response from Circle regarding this matter.

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