FDIC Takes Control: SVB and Signature Bank Assets In Question Amid Crypto Market Rally
In a joint statement released by the US Treasury, Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC), it was announced that the FDIC has taken control of the assets of both Silicon Valley Bank and Signature Bank.
The move was taken to protect depositors, and all customers who had deposits in these banks will have access to their money as of March 13th. However, this has raised concerns about who is left to bank crypto companies in the US.
Depositors Protected, Equity, and Bondholders Wiped Out
The regulators have assured depositors that they will not bear any losses associated with the resolution of Silicon Valley Bank or Signature Bank. It was explained that the banks’ equity and bondholders were the ones being wiped out, as they had knowingly taken risks and lost their money when the risk didn’t pay off.
Management to be Fired, Accountability Emphasized
The joint statement emphasized that the banks’ management would be fired if the bank was taken over by the FDIC. The fourth point made by regulators was that they must get the full accounting of what happened and why, and those responsible can be held accountable.
Crypto Companies Struggle to Find Banking Partners
The FDIC takeover of these banks has left crypto companies struggling to find banking partners. Many banks are refusing to bank crypto companies, citing high risks. This is despite the fact that there are large banks that can offer crypto custody services. Even startups that are not financial services-oriented are tagged as high-risk and have limited access to the banking system.
The crypto exchanges are left to figure out how to move forward, as Okcoin has paused its USD deposits due to regulatory intervention in Signature Bank, its primary partner for customer transactions in dollars.
Crypto Market Rallies: Victory Once Again?
Bitcoin is up almost 18% in the last 24 hours, while Ethereum has also rallied. This is a clear signal from the market that a decentralized currency that allows you to become your own bank is valued in light of recent developments.
Investors are seeking a decentralized alternative as US onramps are bottlenecked. The demand for a decentralized alternative is increasing, with Binance converting the remaining $1 billion Industry Recovery Initiative fund from USD stablecoin to Native crypto, including Bitcoin, BnB, and ETH.
Bitcoin was worth $24,280 at press time, and Ethereum was at $1,670.
Will Circle be Able to Restore Stability to USDC After Signature Bank Failure?
Circle, a leading player in the crypto industry, has been impacted by the recent failures of Silicon Valley Bank and Signature Bank. The collapse of Signature Bank, a critical financial institution for the industry, has left a major hole in the industry’s backend infrastructure. As a result, Circle has found a new banking partner, Cross River Bank, to provide automated minting and redemption for USDC, a stablecoin pegged to the US dollar
Impact of Signature Bank Failure
Signature Bank was a key financial institution to the crypto industry, and its sudden failure has left a major hole in the industry’s backend infrastructure. Signet, a blockchain-based real-time payments system that’s supposed to work 24/7, was used by Circle, Coinbase, and many crypto trading firms. But with the death of Signature, Signet, too, is not functional.
Circle CEO, Jeremy Allaire, confirmed that due to the failure of Signature Bank, the company had to find a new transaction banking partner for USDC operations. Allaire announced that Circle has established a new partnership with Cross River Bank, which will provide automated minting and redemption for USDC stablecoin. The partnership has allowed Circle to resume USDC operations starting from Monday, ensuring seamless settlement and boosting confidence in the stability of the stablecoin.
USDC lost its peg to the US dollar on Friday, following uncertainty about how much of its funds were held in Silicon Valley Bank (SVB). Circle later confirmed that it held $3.3 billion, or 8% of the funds backing USDC, at SVB. However, Circle holds no USDC reserves with Signature Bank, which was closed by regulators on the same day.
The US Treasury and regulators have promised to ensure that all depositors with SVB and Signature Bank will be made whole, and the $3.3 billion USDC reserve deposit held at SVB will be fully available when US banks open on Monday. In addition, Circle will introduce automated USDC minting and redemption for customers through a new banking partner, Cross River Bank, which will go live this week. Despite the recent turbulence, USDC remains redeemable 1:1 with the US dollar.
Coinbase, another key company for USDC, had joined Signet to allow for real-time payments and settlements. However, it is unclear how the failure of Signature Bank will impact Coinbase’s operations. Coinbase paused redemptions between U.S. dollars and USDC on Friday and said they would reopen on Monday when normal banking hours resumed.
The recent failures of Silicon Valley Bank and Signature Bank have sent shockwaves through the crypto industry. The fate of USDC remains uncertain, but Circle is working to right the stablecoin and restore its peg to the U.S. dollar.
Coinbase, Paxos, and Celsius Report Funds Tied up with Now-Shuttered Signature Bank
Several crypto firms have come forward to report their exposure to the now-shuttered Signature Bank, which was shut down by New York regulators on March 12 in conjunction with the United States Federal Deposit Insurance Corporation (FDIC) to “protect the U.S. economy” as they claimed the bank posed a “systemic risk.” Signature Bank was a key partner for many crypto firms, and its closure has prompted concerns about the safety of crypto firms’ funds.
Crypto exchange Coinbase tweeted on March 12 that it had around $240 million in corporate funds at Signature Bank that it expected would be fully recovered. Stablecoin issuer and crypto firm Paxos also came forward, tweeting it had $250 million held at the bank but added it held private insurance that covers the amount not covered by the standard FDIC insurance of $250,000 per depositor.
The Celsius Official Committee of Unsecured Creditors, a body that represents the interests of account holders at the bankrupt crypto lender Celsius, added Signature Bank “held some of its funds” but did not disclose the amount. It added that “all depositors will be made whole.”
Crypto Firms without Exposure to Signature Bank Come Forward
As Signature Bank serviced so many firms in the crypto industry, those firms with no exposure equally came forward to quell fears about their related exposures. Robbie Ferguson, co-founder of Web3 game development platform Immutable X and Mitch Liu, co-founder of the media-focused Theta Network blockchain separately tweeted that both of their respective companies had no exposure to Signature.
Crypto exchange Crypto.com also reported it had no funds in the bank through a March 12 tweet by its CEO Kris Marszalek. The chief technology officer of stablecoin firm Tether, Paolo Ardoino, similarly tweeted Tether’s non-exposure to Signature Bank.
Regulators Take Actions to Protect Depositors
The announcement of Signature Bank’s forced closure aligned with other banking-related announcements by U.S. regulators. The Federal Reserve said the FDIC was approved to take actions to protect depositors at Silicon Valley Bank, a tech-startup-focused bank that experienced liquidity issues due to a bank run that spread contagion to the crypto sector. The Fed also announced a $25 billion program to ensure ample liquidity for banks to cover the needs of their customers during times of turbulence.
As regulators take action to protect depositors and ensure liquidity during times of turbulence, it begs the question: how can we ensure the safety and stability of the crypto industry in an ever-changing financial landscape? Is it time for a new approach to securing and safeguarding these funds?
California Assembly Passed Crypto Licensing Bill, Now Awaits Governor’s Signature – Coinpedia – Fintech & Cryptocurreny News Media
The California assembly has passed a crypto regulating bill that now requires cryptocurrency-related businesses to gain a special license to offer services to users in California. The crypto bill is now in the final process of becoming law in California.
California Is Aiming For Crypto Regulation
On Monday, California Assembly member Timothy Grayson produced the bill, AB 2269, with support from the Consumer Federation of California with a 71-0 majority. The crypto bill will establish the Digital Financial Assets Law in California.
The Digital Financial Assets Law is known as California’s “BitLicense.” A simple pen stroke is left to create a full-fledged law in California. The bill now requires Governor Gavin Newsom, who has until 30 September to sign or veto the bill. California will become one of the first states to require crypto platforms to obtain a special license to offer services in the state.
What Does This Crypto Bill Say?
The crypto law will tighten crypto regulations and bring more transparency to the crypto industry in California. If the governor signs the bill, it will take effect from 1 January 2025. Companies of digital-asset exchanges will get license approval from the state’s Department of Financial Protection and Innovation.
The Department will also be allowed to enforce drastic actions against those who are unlicensed. A non-licensed corporation engaging in digital financial asset business activity will be charged a civil penalty of up to $100,000 daily. Furthermore, if a licensee breaks the rule, they will have to pay a fine of $200,000 for each day of violation.
Stablecoin issuers holding securities as a reserve must have a total amount of stablecoins not less than the amount of all outstanding stablecoins sold or issued in the United States.
Tim Grayson stated, “While the newness of cryptocurrency is part of what makes investing exciting, it also makes it riskier for consumers because cryptocurrency businesses are not adequately regulated and do not have to follow many of the same rules that apply to everyone else.”
Regulators and governments are framing crypto space. Crypto bill provides the user with more closure looks of the crypto space. However, The California BitLicense now completely depends on the governor whether to sign it or not.