The unexpectedly collapse of Silicon Valley Bank (SVB) has swiftly unfolded over the last week, depegging stablecoins, resulting regulators in the United States and the United Kingdom to make emergency strategies and raising fears among small companies, venture investors and other depositors with funds remain at the California technology bank.
Mar. 10: California authority shuts down Silicon Valley Bank
After declaring a sizable sale of assets and stocks intended to raise additional capital, Silicon Valley Bank (SVB) was shut down by California’s financial watchdog on March 10.
The Silicon Valley Bank was ordered to shut down, but the California Department of Financial Protection and Innovation did not provide a cause.
Federal Deposit Insurance Corporation (FDIC) has been named as the receiver to safeguard insured savings by a California watchdog. The FDIC only offers up to $250,000 in protection for each depositor, institution, and ownership group. Major venture capital companies had invested more than $5 billion in the bank. Sequoia Capital and Andreessen Horowitz are two venture capital firms that support cryptocurrencies, and Silicon Valley Bank is one of the top 20 biggest banks in the United States.
Mar. 10: The crisis at the bank is addressed by across the world
SVB UK will “stop making payments or accepting deposits,” according to the Bank of England, which plans to ask the court to put the company into a “Bank Insolvency Procedure,” as of March 10.
US depositors waited in line to receive their money. Unverified reports claimed that the FDIC had plans to cover 95% of uninsured SVB accounts, with 50% of those payments to be made in the upcoming week.
Less than 48 hours after management disclosed that $2.25 billion in stock was required to support operations, the bank’s demise was hastened. Then, on March 9, its equity price crashed, dropping by over 60%.
Mar. 11: The cryptocurrency market is starting to suffer
There are reports of the cryptocurrency business being affected by the failed bank. Circle had SVB of 3.3 billion dollars. “During we expect clarification regarding how the FDIC administration of SVB will affect its depositors, Circle and USDC remain operating normally,”.
The USDC stablecoin issued by Circle depreciated and lost over 10% of its worth. Several stablecoins lost their pegs as a result of the USDC depeg, which had a cascading impact. Affected were DAI, USDD, and FRAX. Circle declared that it would use company “resources” to make up the difference left by the SVB’s demise.
Mar. 11: Dread of contagion increased
As whales attempted to withdraw money from USDC, repercussions were felt throughout the DeFi network. MakerDAO, a DAI issuer, released a last-minute plan to lessen its $3.1 billion USDC risk. On March 11, the swapping group Curve Finance witnessed $7 billion worth of trading records. Dreadful warnings were issued as the fear of contagion quickly grew, with regional banks being seen as especially at risk. Venture capitalists and others gathered around SVB at the same time to show their readiness to keep working with the bank in the event that it were to be acquired and recapitalized.
Mar. 12: Regulators immediately take action
To address the SVB collapse, regulators in the US and the UK started to move. Janet Yellen, the secretary of the U.S. Treasury, stated in an interview that Treasury would not save the bank because it was concentrating on the requirements of depositors. As per Rishi Sunak, the prime minister of the United Kingdom, “immediate strategy to ensure short-term operational and cash flow demands of Silicon Valley Bank UK customers” are in place.
For the UK division of SVB, The Bank of London has submitted an official offer.
On the evening of March 11, according to Bloomberg, the FDIC was holding a sale for SVB. According to the Wall Street Journal, the March 12 auction ended at 2:00 pm Eastern Time. Elon Musk declared that he was “open to the idea” of purchasing the bank in a tweet. Additionally, “material action” is reportedly being prepared by the Joe Biden government in the United States.
Mar. 12: Fed develops a $25 billion scheme to support banks
On March 12, the Federal Reserve Board unveiled the $25 billion Bank Term Funding Program (BTFP), which provides loans to banks and “other eligible depository institutions” for up to one year in order to support any liquidity problems they may experience.
Mar. 12: Fed, SVB depositors will be safeguarded
U.S. federal regulators, including U.S. Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chairman Martin Gruenberg on Mar. 12 announced “decisive actions” which would “fully safeguard depositors” at both Silicon Valley Bank as well as the now-shuttered Signature Bank.
From Monday, March 13, depositors will have full access to their funds. According to a joint statement from the regulators, the public won’t incur any losses related to Silicon Valley Bank’s resolution.
Mar. 13: Biden vows to hold the guilty parties “fully accountable”
On Mar. 13, U.S. President Joe Biden tweeted which he is “firmly committed” to keeping those accountable for the failure of SVB “fully accountable,” adding that he will “have a further say” in a speech later that day.