Crypto rebounds after bank rescue plan revealed
On the morning after “Everything Everywhere All At Once” dominated the Oscars, we’re checking: crypto markets at large (rebounding); the dollar (sliding); stablecoins (holding steady); safe havens such as gold (surging) and, of course, bank stocks (falling), while keeping a particularly close eye on a pair of troubled institutions, failed Silicon Valley Bank (which has been resuscitated) as well as that one remaining crypto-friendly bank, Signature, shut down yesterday by state regulators citing fears of systemic risks.
All of the depositors of Signature Bank and SVB will be made whole, the U.S. Treasury Department and other bank regulators jointly stated Sunday night.
“No losses will be borne by the taxpayer,” they emphasized.
See more: Treasury, Fed and FDIC joint statement on SVB and Signature Bank: full text
To stem a centralized banking system crisis (in part stoked by rising interest rates), the Federal Reserve and Treasury created an emergency program to backstop deposits using the central bank’s emergency lending authority, a move reminiscent of the global financial crisis fifteen years ago. The federal government also announced actions to shore up deposits. A “bridge” bank has been created by the Federal Deposit Insurance Corporation (FDIC).
With one-fourth of its $88 billion in deposits reportedly coming from the crypto sector, Signature had carved for itself a digital asset banking niche, similar to Silvergate, which collapsed last week in an episode that seems to have kick-started regional/specialty bank contagion. After SVB failed on Friday, rocking the tech enclave, uncertainty descended on Circle, a customer of SVB and issuer/backer of the second largest stablecoin, USD Coin (USDC). USDC lost its $1 peg, falling over the weekend to as low as 86 cents. Circle just said that the $3.3 billion it held with SVB will be “fully available.”
