The sudden bankruptcy of Silicon Valley Bank (SBV) has unfolded rapidly over the course of three days, affecting stablecoin prices, prompting regulators in the US and UK to prepare emergency plans and raising fears among small businesses, venture capital investors and other depositors with funds blocked at the Californian bank.
The Cointelegraph team has put together a roundup of the latest major developments surrounding the struggling banking institution:
March 10: Silicon Valley Bank is shut down by the California financial watchdog
Silicon Valley Bank (SVB) was shut down by California’s financial watchdog on March 10 after announcing a major asset and stock sale aimed at raising additional capital.
The California Department of Financial Protection and Innovation confirmed that Silicon Valley Bank had been ordered closed, but did not specify the reason. The Californian regulator appointed the FDIC as receiver to protect insured deposits.
California’s watchdog appointed the Federal Deposit Insurance Corporation (FDIC) as receiver to protect insured deposits. However, the FDIC only insures up to $250,000 per depositor, institution, and property category. The bank held more than $5 billion in funds from major venture capital firms. Silicon Valley Bank is one of the 20 largest banks in the United States, providing banking services to crypto-friendly venture capital firms such as Sequoia Capital and Andreessen Horowitz.
Customers lining up outside of Silicon Valley Bank at its Menlo Park, CA branch. pic.twitter.com/SDNrSUC1C0
— Cointelegraph (@Cointelegraph) March 10, 2023
March 10: The world responds to the banking crisis
The Bank of England stated on March 10 that SVB UK will “stop making payments or accepting deposits” as the UK central bank intends to ask the court to place SVB UK in “Bank Insolvency Proceedings”.
US depositors queued up to withdraw funds. According to unconfirmed news, the FDIC was planning to cover 95% of SVB’s uninsured deposits, of which 50% would be paid out next week.
The bank’s fall was rapid, less than 48 hours after the board will reveal that it needed to raise $2.25 billion in stock to prop up its operations. Its share price plunged, falling more than 60% on March 9.
March 11: The crypto industry begins to feel the effect
News emerged about the cryptocurrency sector’s exposure to the failing bank. Circle had $3.3 billion in SVB. A Circle spokesperson told Cointelegraph that “while we await clarity on how the FDIC receivership of SVB will affect its depositors, Circle and USDC continue to operate as normal.”
Circle’s USDC stablecoin lost its peg to the US dollar and fell more than 10%. USDC peg loss USDC it caused a ripple effect that caused several stablecoins to also lose their peg as well. IAD (DAI), USDD and FRAX were affected. Circle announced that it would use corporate “resources” to cover the shortfall caused by the collapse of SVB.
March 11: fear of contagion to other banks increases
The repercussions were felt throughout the DeFi community, as the whales tried to sell their USDC. DAI issuer MakerDAO issued an emergency proposal to mitigate its $3.1 billion exposure to USDC. Exchange fund Curve Finance recorded a record trading volume of $7 billion on March 11. Fear of contagion grew rapidly, with regional banks seeing themselves as particularly endangered. At the same time, private equity investors and others rallied around SVB to express their willingness to continue working with the bank, should it be bought out and recapitalized.
March 12: Regulators spring into action
Regulatory bodies in the United States and the United Kingdom began to take action to deal with the collapse of SVB. US Treasury Secretary Janet Yellen stated in an interview that the Treasury was focused on the needs of depositors and would not bail out the bank. UK Prime Minister Rishi Sunak stated that “immediate plans to ensure the near-term liquidity and operational needs of Silicon Valley Bank UK customers” would be presented.
The Bank of London has submitted a formal offer for the UK branch of SVB.
Bloomberg reported that the FDIC had been conducting an auction process for SVB on the evening of March 11. The Wall Street Journal reported that bidding closed at 14:00 ET on March 12. Elon Musk said in a tweet that he was “open to the idea” of buying the bank. The administration of US President Joe Biden is also said to be preparing a “material action”.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.
