This Week on Crypto Twitter: Crypto Has a Banking Crisis
Silvergate, the first crypto bank, faced a bank run that led to its downfall.
Despite facing allegations around AML, it was not these issues that ultimately caused the demise of $SI.
The responsibility for bank supervision lies with the Executive Branch, but this process was… https://t.co/rOz5EmNdHP
— Ram Ahluwalia, crypto CFA (@ramahluwalia) March 9, 2023
An explainer on what is going on with Silicon Valley Bank:
– In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021.
– As deposits grew, SVB could not grow their loan book fast enough to generate the yield they… https://t.co/xHDc4ebvsr
— Jamie Quint (@jamiequint) March 9, 2023
The failure of @SVB_Financial could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash. If private capital can’t provide a solution, a highly dilutive gov’t preferred bailout should be considered.
— Bill Ackman (@BillAckman) March 10, 2023
NEWS: Documents show Silicon Valley Bank’s president personally pressured lawmakers to weaken bank regs.
Some lawmakers objected.
But the bank spent big on lobbying & regs were weakened.
Today the bank became the 2nd largest bank collapse in US history. https://t.co/a8XEifQidA
— David Sirota (@davidsirota) March 11, 2023
Silicon Valley Bank $SIVB reports earnings tomorrow
Investors have rightfully been fixated on $SIVB’s large exposure to the stressed venture world, with the stock down a lot.
However, dig just a little deeper, and you will find a much bigger set of problems at $SIVB… 1/10
— Raging Capital Ventures (@RagingVentures) January 18, 2023
6/ Selling any piece of HTM securities would have created a immediate mark to market to a $16B loss. Can’t really sell loan assets that quickly either.
— samir kaji (@Samirkaji) March 10, 2023
If you’re affected, here’s what I would say:
Hi, I’m a constituent in your district. I work at X, a startup that has deposits with SVB, which was shut down this morning.. We won’t be able to make payroll and we are one of thousands of startups that would have to shut down or… https://t.co/SvaR4bD6v1
— Garry Tan 陈嘉兴 (@garrytan) March 10, 2023
In a deep sense — though not a legal sense — what SVB actually did was a kind of affinity fraud a la Madoff. It managed to convince the VC/startup/crypto etc world that it was one of them, part of their community, and hence trustworthy 5/
— Paul Krugman (@paulkrugman) March 12, 2023
From a source I trust: @SVB_Financial depositors will get ~50% on Mon/Tues and the balance based on realized value over the next 3-6 months. If this proves true, I expect there will be bank runs beginning Monday am at a large number of non-SIB banks. No company will take even a… https://t.co/2BoqtCDKJt
— Bill Ackman (@BillAckman) March 11, 2023
Crypto companies distance themselves
Tether explained that it doesn’t have any exposure to Silicon Valley Bank.
The cash arm of the USDT reserves is mainly in various banks in the Bahamas and Puerto Rico. The $39 billion Treasury reserve is managed by Wall Street bond-trading magnate Cantor Fitzgerald.
— Wu Blockchain (@WuBlockchain) March 11, 2023
In light of recent news, we would like to confirm that the Avalanche Foundation has no exposure to Silvergate and a little over $1.6mm of exposure to Silicon Valley Bank. Avalanche Foundation is saddened by the news about SI and SIVB, and hope that all depositors are made whole.
— Avalanche 🔺 (@avalancheavax) March 10, 2023
Square the Circle
“Circle’s cash held at U.S. regulated financial institutions: Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank and Silvergate Bank.”
— Adam Cochran (adamscochran.eth) (@adamscochran) March 10, 2023
Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally.https://t.co/NU82jnajjY
— Circle (@circle) March 10, 2023
Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion.
This is a normal risk-management procedural step to take while we monitor the situation.
— Binance (@binance) March 11, 2023
We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.
— Coinbase (@coinbase) March 11, 2023
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.
— Circle (@circle) March 11, 2023
With USDC insolvency fears rampant, users are fleeing to safety in other stables. Not all of them are going to make it there in one piece, however.
Here’s how one unlucky user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV
— BowTiedPickle.eth | Solidity Shipper (@BowTiedPickle) March 11, 2023