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Third US Bank Failure In A Week
Round Up Of The Weekend's Top Tech News
Signature Bank Closed By Regulators, Becoming The Third US Bank Failure In A Week
Signature Bank, one of the major US banks used by cryptocurrency companies, has been closed by New York regulators, making it the third major US bank to fail in a week. Depositors at Signature Bank will be protected, with the FDIC guaranteeing more than the standard $250,000. The bank had $88.59 billion in deposits as of December 31, 2022. Crypto exchange Coinbase had $240 million in cash at Signature, and stablecoin provider Circle had $3.3 billion in reserves at Silicon Valley Bank, another bank that failed recently. Both companies will now use other banking partners for transactions.
The Impact of Silicon Valley Bank's Implosion on Crypto's Safe Haven Status
The collapse of Silicon Valley Bank, where the stablecoin issuer Circle has billions in cash deposits, has led to concerns about its ability to meet redemptions, causing the value of its USDC stablecoin to tumble below its $1 peg. The situation has alarmed investors as stablecoins are regarded as safe havens for traders who park their funds for a while. The USDC has also been used as a popular token for decentralized finance and lending as its price is meant to remain fixed. While Circle has pledged to cover any shortfall in the stablecoin, the impact of the situation could damage USDC's reputation.
Potential Impact of Backstopping All SVB Deposits on Regional Banks' Sale Prospects
The U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corp. have fully backstopped the deposits of Silicon Valley Bank (SVB), which was taken over by FDIC on Friday. The FDIC has sought bids from interested parties to find a suitable bidder to handle SVB's assets and customers. Regional banks like PNC Financial, US Bank, Truist, and Capital One are likely to prevail in the sale process, while large lenders like JPMorgan Chase or Bank of America are unlikely to be in the running. However, finding a suitable buyer by Monday could be difficult, and some interested parties might discount the bid so much that the FDIC would find it unattractive. The FDIC set up the Deposit Insurance National Bank of Santa Clara to run SVB's branches until a buyer or buyers are found.
VC Firms Lobby for Relief to Prevent Layoffs Tied to Silicon Valley Bank
Venture capitalists and influential investors are taking emergency measures to help startups avoid furloughs amid concerns that many companies won't be able to pay their employees this week due to funds tied up at Silicon Valley Bank. Some investors have lobbied lawmakers to suspend California state law, while others have offered to write personal checks to affected startups. The US Treasury, Federal Reserve, and Federal Deposit Insurance Corp have since announced they will fully backstop deposits at the bank. Other measures include Jefferies and other Wall Street firms offering to buy uninsured deposit claims at a discount and several VC firms offering low-interest loans to portfolio companies.
Worst-Case Scenarios of SVB Fallout Are Unlikely
The failure of Silicon Valley Bank (SVB) has caused turmoil, but the Federal Reserve has announced steps to prevent a cascade of bank failures, and the government has indicated it will backstop all of SVB’s uninsured deposits. The panic surrounding the failure has focused on what startup customers of SVB will do for cash, but various efforts are underway to help businesses affected by the failure. Meta Platforms is expected to begin its second round of layoffs, and the crypto market is being watched for fallout from the SVB disaster. Circle, the issuer of USD Coin, is under scrutiny due to its exposure to SVB.
Etsy Delays Payouts for Sellers Due to Silicon Valley Bank Collapse
Etsy has informed some sellers that they may not receive their payments on time due to the collapse of Silicon Valley Bank, which the company used to send out deposits to some sellers. The sudden collapse of the bank has left shop owners worried about the future of their stores. Etsy is working to fulfill deposits using its other payment partners and will begin resuming some payments as soon as March 13th. However, it remains unclear how many sellers are impacted by the delays, and some shop owners have expressed frustration and confusion over the lack of communication from Etsy about the issue. Many small business owners on Etsy rely on the income they receive from selling handmade products on the platform, and not receiving scheduled payments could make it more difficult for them to front the costs associated with their craft.