The US financial industry has experienced one of the biggest bank failures since the 2008 financial crisis.
Silicon Valley Bank, a Santa Clara-based commercial bank considered the 16th-largest bank in the United States, has collapsed.
The news about the downfall of Silicon Valley Bank broke on March 10th. In the press release shared by Federal Deposit Insurance Corporation (FDIC), the agency revealed that the California Department of Financial Protection and Innovation closed down the bank.
Did you know?
Want to get smarter & wealthier with crypto?
Subscribe - We publish new crypto explainer videos every week!
What is DeFi in Crypto? (Explained with Animations)
According to the announcement, the California financial watchdog has appointed FDIC as a receiver responsible for protecting insured deposits.
In the press release, FDIC specified that depositors can access their funds on March 13th. The announcement reads:
All insured depositors will have full access to their insured deposits no later than Monday morning, March 13th, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds.
On the same day, the Bank of England informed that the UK’s branch of Silicon Valley Bank is set to “stop making payments or accepting deposits.” Moreover, the Bank of England highlighted that it will aim to place California-based banks into a “Bank Insolvency Procedure.”
It is believed that the shutdown came less than 48 hours after Silicon Valley Bank revealed that it needs to raise around $2.25 billion in stocks to boost its operations.
Soon after the collapse of Silicon Valley Bank, the crypto industry started feeling the impact. Several news reports revealed that Circle’s USD Coin (USDC) is backed with $3.3 billion in cash reserves, which after the collapse, got stuck in Silicon Valley Bank.
Following the news, on March 11th, USDC lost its $1 peg and fell to as low as $0,97. On the same day, Circle issued a statement, claiming it “will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
At the time of writing, USDC retails for $0,9919.
However, Circle is not the only crypto-related firm whose funds are now stuck at Silicon Valley Bank. It is believed that a now-bankrupt crypto lender BlockFi also has over a quarter of a billion funds stuck at Silicon Valley Bank.