Silicon Valley Bank (SVB) collapse is the swiftest that the financial markets have witnessed to date. The bank collapsed in less than 48 hours after disclosing it was raising funds by selling assets and stocks to remain operational.
Silicon Valley Bank has been providing financial services to popular crypto-focused venture capital (VC) firms like Andreessen Horowitz and Sequoia.
The bank revealed in its mid-quarter financial update that it had sold $21 billion in securities at a staggering loss of $1.8 billion and it needed to raise some amount to cover the loss.
California’s DFPI ordered Silicon Valley Bank
A day after SVB disclosed plans to raise additional capital, the California Department of Financial Protection and Innovation (DFPI) ordered the bank to be closed. This makes SVB the first FDIC-insured bank to be closed in 2023.
Although the DFPI has not disclosed the reason it ordered the bank to shut down, it went ahead to appoint the FDIC as the receiver to protect all the insured deposits.
The FDIC announced that depositors would be able to fully access their insured deposits after Monday, March 13, 2023. On the other hand, uninsured depositors will receive a “receivership certificate” that will entitle them to future dividend payments once all assets from Silicon Valley Bank have been sold.
Circle discloses exposure to SVB
Circle, the issuer of USDC stablecoin, in a tweet on March 10 informed its community that it was unable to remove $3.3 billion worth of USDC reserves from Silicon Valley Bank before the bank was closed.
The revelation has caused USDC, which is among the largest stablecoins by market cap, to depeg below $0.90. Binance and Coinbase have also suspended USDC conversions as customers flocked to the two exchanges to redeem their funds from the stablecoin whose future hangs on the balance.