The sudden fall of the US Silicon Valley Bank (SVB) on Friday had devastating consequences for the companies. But the crypto world was also affected. Although the US government took over the bank and guaranteed deposits of up to $250,000, the vast majority of deposits with the bank were much higher. The company has done a lot of business with tech startups.
Roku, the maker of smart boxes that allow TV viewers to watch streaming services, among other things, reported that it had plenty of money in its SB account. This is just over a quarter of the total cash the company had. Roku said it doesn’t know how much money it will see again, but noted that it still has enough money left for a year.
Other technology companies may also have problems. If they can’t access their credits, it will be difficult to pay salaries, for example.
Cryptocurrency in US dollars
The US dollar cryptocurrency also ran into trouble. Circle, the company behind that digital currency, has announced that it has $3.3 billion in assets with SVB. Circle needs this money to guarantee the coin’s dollar value. This cryptocurrency is the so-called stablecoin, the value of which is secured by an equivalent value in the regular currency. Circle was forced to abandon this peg to the dollar and the currency’s value in US dollars fell from $1 to $0.89 cents. Many crypto exchanges like Binance and BlockFi have stopped trading in the currency. The dollar coin was worth $36 billion before issuance.
The problems at SVB were caused by the bank’s operation. The bank has invested a lot of money in government loans in recent years, but due to the deteriorating economic situation, many of the bank’s customers wanted more of their money. If the SVB sells government bonds before the end of the term, the bank receives much less money due to the interest increase. That is why the bank wanted to raise money by issuing shares, but this report led to unrest among clients.
Partially frozen balances
On Friday, these clients attempted to withdraw $42 billion from their accounts, after which the US authorities intervened. So credits of up to $250,000 are paid, and anything over that is based on the sale of SVB or parts thereof.
British regulators have announced the closure of the British branch of SVB. The British subsidiary could no longer meet its payment obligations without the support of the parent company. UK account holders will be compensated with up to £85,000 under local rules, or £170,000 for joint accounts.
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