The sudden collapse of Silicon Valley Bank (SVB) unfolded rapidly last week, decoupling from stablecoins, leading regulators in the U.S. and U.K. to prepare contingency plans and raising concerns among cash-strapped small businesses, venture capitalists and other savers in California tech. bank.
The team at Cointelegraph has compiled the latest and major developments surrounding the troubled bank, starting with the most recent: President Joe Biden tweeted on March 13 that he was "strongly committed" to holding those responsible for SVB's collapse "full accountable," adding that he would speak later on March 13. "There's more to say" in his speech.
On March 12, U.S. federal regulators, including U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and FDIC Chairman Martin Grunberg, announced "decisive action" that will "comprehensively protect" Silicon Valley Bank and Signature bank for depositors of the now-defunct bank.
"Starting Monday, March 13, depositors will have access to all their money. Any losses related to the SVB resolution will be borne by taxpayers," a joint statement from the regulators said. The Federal Reserve Board announced on March 12 a $25 billion Bank Term Funding Program (BTFP), which provides loans for up to a year to banks and "other eligible depository institutions, designed to support the any liquidity issues.
Regulators in the U.S. and U.K. began to take action in response to SVB's collapse. U.S. Treasury Secretary Janet Yellen said in an interview that the Treasury Department is focused on the needs of depositors and will not bail out banks. UK Prime Minister Rishi Sunak said there were "immediate plans to secure the short-term operational and cash flow needs of SVB's UK clients".
The Bank of London has made a formal bid for SVB's UK branch.
Bloomberg reported that the FDIC had been holding an auction for SVB on the night of March 11. Bidding closed at 2 p.m. ET on March 12, The Wall Street Journal reported. Elon Musk said in a tweet that he had "thoughts about buying a bank." According to reports, the administration of US President Biden is also preparing "substantive actions."
When whales attempted to move funds out of USDC, the reverberations were felt throughout the DeFi community. DAI issuer MakerDAO issued an emergency proposal to mitigate its $3.1 billion exposure to USDC. Exchange pool Curve Finance hit a record $7 billion in transactions on March 11. Fear of contagion has grown rapidly, with regional banks seen as particularly at risk and dire warnings issued. Meanwhile, venture capitalists and others rallied around SVB, saying they were willing to stay with the bank if it was acquired and recapitalized.
There have been reports of the cryptocurrency industry’s exposure to failed banks. Circle has $3.3 billion in SVB. A Circle spokesperson told Cointelegraph, “While we await how the FDIC takeover of SVB will affect its depositors, Circle and USDC continue to operate normally.”
Circle’s USDC stablecoin depegged and lost over 10% of its value. The USDC (USDC) depeg caused a domino effect that also knocked several stablecoins off their pegs. Dai (DAI), USDD and FRAX are affected. Circle announced it would use company "resources" to cover the shortfall in funding from the SVB collapse.
The Bank of England said on March 10 that SVB UK would "cease making payments or accepting deposits" as the central bank intends to apply to the courts to place SVB UK in "bank insolvency proceedings".
U.S. depositors line up to withdraw money. According to an unconfirmed report, the FDIC plans to cover 95% of uninsured SVB deposits, 50% of which will be paid within the next week.
The bank's downfall came less than 48 hours after management disclosed it needed to raise $2.25 billion in stock to shore up operations. Its shares then plummeted, falling more than 60% on March 9. Silicon Valley Bank (SVB) was shut down by California financial regulators on March 10 after announcing a massive asset and stock sale to raise additional capital.
The California Department of Financial Protection and Innovation confirmed that Silicon Valley Bank was ordered to close, but did not specify why.
California regulators have appointed the Federal Deposit Insurance Corporation (FDIC) as a receiver to protect insured deposits. However, the FDIC can only insure up to $250,000 per depositor, per institution, and per ownership class. The bank holds more than $5 billion in funding from major venture capital firms. Silicon Valley Bank is one of the top 20 banks in the U.S., providing banking services to crypto-friendly venture capital firms such as Sequoia Capital and Andreessen Horowitz.
