The release of a crucial joint statement by U.S. Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg gave the cryptocurrency market tremendous cause to celebrate on Sunday (March 12).
As you are probably aware, Silicon Valley Bank (SVB) was shut down by Californian regulators on Friday, March 10, and transferred to the US Federal Deposit Insurance Corporation (FDIC).
Deposits at SVB total $175 billion, 89% of which are uninsured. SVB was the largest bank by deposits in Silicon Valley, the home of some of the biggest names in technology, and the 16th largest bank in the United States at the time of its demise (including Ripple).
According to three people with knowledge of the situation who spoke on the condition of anonymity to describe private discussions, the federal government is “seriously considering safeguarding all uninsured deposits at Silicon Valley Bank, weighing an extraordinary intervention to prevent what they fear would be a panic in the U.S. financial system.”
A Joint Statement by the U.S. Department of the Treasury, the Federal Reserve, and the FDIC was just released as a press release by the U.S. Department of the Treasury.
The three parties listed above have determined to take the following procedures to assure complete protection for all depositors at Silicon Valley Bank and at Signature Bank (which was shut down today), according to this statement:
“Secretary Yellen approved moves that will allow the FDIC to finish resolving Silicon Valley Bank, Santa Clara, California, in a way that properly protects all depositors, following advice from the boards of the FDIC and the Federal Reserve and consultation with the President. Beginning on Monday, March 13, depositors will have access to all of their funds. The taxpayer won’t incur any losses as a result of Silicon Valley Bank’s bankruptcy. We are also announcing a comparable systemic risk exception for the recently shut down Signature Bank of New York, New York. This institution will make all depositors whole. Like with Silicon Valley Bank’s bankruptcy, the taxpayer won’t bear any damages.
There will be no protection for shareholders or some holders of unsecured debt. Also, senior management was fired. A special tax on banks will be used to make up any losses to the Deposit Insurance Fund from supporting uninsured depositors, as required by law. Last but not least, the Federal Reserve Board said on Sunday that it will provide additional funding to qualifying depository institutions in order to ensure that banks can adequately service the demands of all of its depositors.
As Circle had $3.3 billion of $USDC’s cash reserves at Silicon Valley Bank and now knows it will be getting all of that money back on Monday, this announcement is good news for the cryptocurrency market, which primarily relies on dollar-backed stablecoins, especially $USDC (March 13).