Cryptocurrency investors are now aware that it does not take much to cause a multi-billion-dollar firm to crumble. This week, the California Department of Financial Protection and Innovation closed Silicon Valley Bank (SVB) on March 10, just two days after the announcement of its financial issues. As Cointelegraph previously reported, SVB was the first FDIC-insured bank to fail since 2023. The Federal Deposit Insurance Corporation can back up US depositors before any bank collapse, but unfortunately this was not enough to prevent a large drop in stock prices when the markets opened on Monday. Despite this, Bitcoin (BTC) and the larger crypto market both saw an increase.
The SVB disaster created an intense, albeit brief, period of fear in the crypto space. This was exacerbated by Circle’s USD Coin (USDC) depegging from the US Dollar. It was clear that Circle had made a mistake by keeping a portion of its reserves in SVB after its collapse.
This week’s Crypto Biz dives into the SVB fiasco and how it impacted crypto markets.
Silicon Valley Bank Sealed By California Regulator
On March 10, the California Department of Financial Protection and Innovation shut down Silicon Valley Bank, with the FDIC then appointed as a receiver to protect insured deposits. This news caused a fire sale of crypto and financial assets as SVB, a top-20 US bank by total assets, was listed. The question was what had prompted regulators to shut down the bank? Earlier in the week, SVB had released its mid-quarter financial update, which revealed a $1.8 billion loss due to securities sales and the need to raise $2.25 billion to stabilize operations. SVB was a trusted partner to many crypto-focused venture capital funds, however its downfall was ultimately due to its duration risk and not its crypto industry exposure. Fortunately, Washington was quick to state that all depositors would be protected, not just accounts up to $250,000. Later, it was confirmed that taxpayers would not be charged for securing depositors.
Circle ‘Accessible’ to Reserves of USDC Worth $3.3B: Silicon Valley Bank CEO
One of the companies affected by SVB was a stablecoin issuer Circle. The bank held $3.3 billion worth of reserves in USDC. USDC lost its peg to the US dollar and its market share once SVB collapsed, as it was unclear if and when Circle could access its reserves. USDC dropped to $0.87 at its lowest point, but it has since been redeemed back to the same level as the dollar. Circle was able to confirm that it had access to its SVB reserves. As a result of USDC redemptions, USDC has seen a significant drop in its market share in the last week. USDC’s market cap currently stands at $38.4 billion, which is less than half of rival Tether (USDT), which is valued at almost $73.6 billion.
Breaking: Signature Bank Closed by New York Regulators Citing ‘Systemic Risk’
SVB was not the only crypto-friendly bank to fail this week. On March 12, the Manhattan-based Signature Bank was officially shuttered by The New York Department of Financial Services, allegedly to protect the US economy and increase public confidence in the banking system. “The actions we took today were designed to limit the consequences of depositor outflows from Silicon Valley and from Signature and to reduce any spillover effects,” a Treasury official reported. Like SVB depositors, all Signature Bank account holders are protected and taxpayers will not be affected by the settlement. As of December 31, 2009, Signature Bank had nearly $89 billion in deposits.
South Korea Launches ‘Metaverse Fund’ to Push Domestic Initiatives
“Metaverse” is still a relatively unknown concept, but it is taken seriously in South Korea. The Seoul Ministry of Science ICT announced that 24 billion won ($18.1 million) would be allocated to metaverse development, out of a total pot of 40 billion won ($30.2 million). The newly launched Metaverse Fund is said to support mergers and acquisitions of various metaverse-related companies, a move that could give the country a potential edge in the growing sector. Furthermore, as Cointelegraph reported earlier this month, Mark Zuckerberg’s Meta was granted court approval to carry out its metaverse acquisition plans.
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