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The New York Department of Financial Services seized crypto-friendly Signature Bank in order “to protect depositors,” the state banking regulator said in a Sunday night announcement.

In an action similar to what California’s banking regulator performed on Friday in reaction to an extraordinary run on deposits at Silicon Valley Bank, the Federal Deposit Insurance Corp. was also appointed receiver of the New York-based bank.

In a separate statement, U.S. federal bank regulators guaranteed full return of Silicon Valley and Signature Bank customer deposits. 

“All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” the Federal Reserve Board, Treasury Department, FDIC said in a joint statement, while guaranteeing that, “No losses will be borne by the taxpayer.” 

Signature and now defunct Silvergate, which decided to wind down operations this week, were top banks used by crypto companies, raising the question of where they’ll be able to turn to next.

Signature had taken steps at the end of last year to bring down the concentration of crypto deposits it held by string a 20% cap.

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the regulators said. “This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

Signature’s senior management has also been removed and shareholders and certain unsecured debtholders will not be protected, the statement said.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Silicon Valley Bank will not get a government bailout, Treasury Secretary Janet Yellen said on the news program Face the Nation Sunday.

The tech industry-driven bank was shut down by regulators this week, sending shockwaves around the crypto industry. USDC issuer Circle and other companies have billions in uninsured funds stuck at SVB.

“During the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking,” Yellen said. “And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”

Still, Yellen said that the “American banking system is really safe and well-capitalized,” referring to new controls implemented after the 2008 financial crisis.

“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Yellen said. 

The Federal Deposit Insurance Corporation (FDIC), which took over as the bank’s receiver, is auctioning SVB’s assets. Final bids are due Sunday, Bloomberg reported.

The agency has been rushing to sell the bank over the weekend, in an effort to make as many funds available as possible by Monday as trading resumes. Deposits up to $250,000 are insured by FDIC.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Over the past 24 hours, one Ethereum address liquidated almost 500 Moonbirds NFTs for significant losses.

Selling in batches, the address realized losses between 9% and 33% — with 200 Moonbirds sold for a loss greater than 32%. The transactions all took place on NFT marketplace Blur and amount to a total loss of more than 700 ether, according to NFTTrack.

The address in question no longer holds any NFTs and its ether balance is below 0.001 ETH ($1.21).

The floor price for Moonbirds has declined by more than 27% over the past 24 hours.

Often considered a “blue-chip” NFT collection, Moonbirds made headlines last April when, within a week of its launch, one sold for 350 ether — worth about $1 million at the time.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Regulators are scurrying to sell assets of the failed Silicon Valley Bank this weekend and hope to make between 30% to 50% of uninsured deposits available for withdrawal Monday, Bloomberg reported.

Regulators closed SVB on Friday amid a bank run and the Federal Deposit Insurance Corporation stepped in as the bank’s receiver. The bank is popular among tech companies and start-ups. 

More cash could become available if the FDIC is able to sell assets by Sunday night, before banking resumes on Monday morning. Silicon Valley Bank had approximately $209 billion in total assets and $175.4 billion in total deposits as of Dec. 31, 2022. Deposits of up to $250,000 are insured by the FDIC.

Silicon Valley Bank is the largest U.S. bank to fail in over a decade. The collapse sent shockwaves through the tech industry over the weekend. USDC issuer Circle has $3.3 billion of its cash reserves for the stablecoin stuck at Silicon Valley Bank. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

USDC issuer Circle said it will resume normal operations Monday and that USDC will remain redeemable one-for-one with the U.S. dollar after Silicon Valley Bank collapsed. 

Circle said that in the event Silicon Valley Bank does not return in some fashion, it is required by law and will stand behind USDC and cover any shortfall using corporate resources. It will seek external capital if necessary, Circle said.

USDC lost its peg shortly after Silicon Valley Bank collapsed and dropped to as low as $0.88. The company held $3.3 billion of its reserves behind the stablecoin in the failed bank, which is popular among tech firms. 

USDC has rebounded to $0.97, according to CoinGecko.

Regulators closed Silicon Valley Bank on Friday and the Federal Deposit Insurance Corporation stepped in as the bank’s receiver.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The consequences could be “vast and profound” if Silicon Valley Bank is not bailed out, according to billionaire investor Bill Ackman.

Ackman warned of an “irreversible mistake” if a major bank does not acquire SVB before business opens on Monday, or if the U.S. government does not guarantee all of the failed bank’s deposits.

“The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake,” Ackman said in a lengthy tweet on Saturday. “The world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank.”

A California regulator closed SVB on Friday and the Federal Deposit Insurance Corporation stepped in as the bank’s receiver. SVB was popular with crypto-related companies, start-ups and venture capitalists.

Ackman believes it is unlikely that another major bank like JPMorgan Chase, Citibank or Bank of America will acquire SVB. The billionaire investor said he would have been open to participating with an “equity injection” if the government guaranteed deposits on Friday and allowed the bank to be transferred to a new owner.

He warned that the bank’s clients will soon run out of available funds if denied access to their accounts. 

“Thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week,” Ackman said.

Ackman also had harsh words for the FDIC and the Office of the Comptroller of the Currency, saying both agencies “screwed up” and should have been watching SVB more closely.

“The FDIC’s and OCC’s failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses,” Ackman said.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Circle USDC transactions through Signature Banks Signet network won’t process until Monday, according to a note sent by the company to trading firms.

The firm, which founded USDC in 2018 with Coinbase, revealed Friday that $3.3 billion of its reserves behind its flagship stablecoin were stuck with the failed Silicon Valley Bank. The news triggered a sharp decline in USDC, which is meant to stay pegged one-to-one to the U.S. dollar. 

The note confirms transactions on Signet—which traders used to move funds over the weekend— “will be processed on Monday when banking resumes during normal working hours.”

The Signet system, designed to enable real-time payments for commercial clients, is active but is “reaching a capacity threshold which is causing the temporary delay,” according to the note sent by Circle and reviewed by The Block. 

Circle didn’t immediately respond to a request for comment.

The delay may explain why the premiums witnessed on exchanges like Coinbase following the flight from USDC are not being arbitraged away as their order books merge USD with USDC.

USDC lost its peg to the U.S. dollar overnight, dropping as low as $0.88 following the collapse of Silicon Valley Bank. The crypto market was frustrated with Circle over a lack of transparency surrounding its exposure to the bank, which it eventually confirmed as being $3.3 billion.

Signature is one of the few remaining U.S. crypto-friendly banks after Silvergate Bank voluntarily liquidated and wound down operations on Wednesday.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

MakerDAO’s risk unit issued an emergency proposal to its governance community following the depegging of the USDC stablecoin after the collapse of Silicon Valley Bank.

Maker is the DeFi lending protocol that issues the decentralized stablecoin DAI. Being 54.5% backed by USDC, DAI has also been caught up in USDC’s depegging event and is currently trading at $0.93.

The risk unit proposed several urgent changes to limit Maker’s exposure to potentially impaired stablecoins and other risky collateral while maintaining sufficient liquidity to sustain DAI’s peg and ensure the Maker Protocol can process potential liquidations of crypto-collateralized vaults.

The proposals include reducing the maximum amount of DAI that can be borrowed against specific collateral, reducing daily mint limits, increasing fees to discourage dumping of USDC and eliminating exposure to other DeFi protocols.

MakerDAO said it encouraged “MKR holders and delegates to review and support this executive vote with the purpose of deploying the aforementioned parameter changes to the Maker Protocol as soon as possible.

“Once the executive vote is approved by MKR holders and delegates, the proposed changes will be deployed to the Maker Protocol within the next 48 hours,“ it added.

DAI/USD chart by CoinGecko

Earlier in the day, MakerDAO tweeted: “Total collateralization of the system is at 154% with $8.26 billion worth of collateral backing 5.38 billion DAI. No liquidations have been triggered during the last week. The system is working as expected and always has been. Maker Protocol’s code is law for DAI stability.”

USDC lost its peg to the U.S. dollar overnight, dropping as low as $0.88 following the collapse of Silicon Valley Bank. The crypto market was frustrated with its issuer, Circle, over a lack of transparency regarding its exposure to the bank, which Circle eventually confirmed as being $3.3 billion of its approximately $40 billion USDC reserves.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

There’s hardly ever a dull week in crypto, and this week was certainly no exception. 

Silvergate was back in the news as the crypto bank’s troubles finally saw its doors close amid reverberations across the market.

That impact was also felt by the stablecoin USDC, which lost its peg to the U.S. dollar following the collapse of Silicon Valley Bank, the second crypto-friendly bank to fail this week.

Still, the Grayscale team was optimistic after a hearing over the Securities and Exchange Commission’s rejection of the firm’s application for a spot bitcoin ETF, one of the brighter notes in a tough week for the industry.

Let’s unpack:

Silvergate closes as crypto banking concerns spread

The week started poorly for Silvergate, with shares down 6.1% on Monday after a bad month for the crypto bank. 

On Wednesday, matters worsened as Silvergate Capital confirmed it was voluntarily liquidating the Silvergate Bank and winding down operations. That raised concerns that crypto firms’ access to the U.S. banking system would be further constrained. 

By Thursday, the markets were plummeting, seeing Silvergate shares tumble 42.1% by market close. The crypto market followed, with bitcoin dropping to its lowest point in seven weeks, below the $20,000 level.

Concerns also spread into the wider banking market, with shares falling across the sector. Alternative crypto-friendly bank Signature fell 25% on Friday before trading was stopped. For Silicon Valley Bank, which also banked crypto firms, the news was worse, plunging 63% in pre-market trading before being halted after companies were urged to pull their funds. Later in the day, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, and entered receivership.

A brighter note on the crypto banking front this week was that the crypto exchange Kraken is on track to launch a bank “very soon” despite a regulatory “weird place.”

USDC stablecoin depegs following SVB collapse

The fallout from the collapse of Silicon Valley Bank, the largest bank to fail since 2008, then spread to the USDC stablecoin overnight, as it lost its peg to the U.S. dollar, dropping as low as $0.88. The crypto market was frustrated with its issuer Circle over a lack of transparency surrounding its exposure to the bank.

In the absence of clarity from Circle, investors scrambled to exit their USDC holdings, swapping into alternative stablecoins like Tether’s USDT or exiting the crypto market entirely into fiat. USDC witnessed its biggest depeg since it launched in 2018. Its market cap dropped below $40 billion — a 15% decline in the last 24 hours, as $2.34 billion worth of USDC was burned, suggesting redemption for dollars.

That caused chaos across centralized and decentralized crypto exchanges alike. Coinbase and Binance halted USDC conversions. Meanwhile, USDT moved in the opposite direction, briefly spiking to $1.06 against the dollar on Kraken. Ethereum transaction fees jumped tenfold as USDC holders rushed for the exits. And other stablecoins like frax and DAI — also partly backed by USDC — depegged to similar levels.

As a fully reserved stablecoin, USDC is 100% backed by cash and short-dated U.S. Treasurys and is supposed to be redeemable 1:1. Circle was largely silent on Friday regarding exposure to the bank until confirming Silicon Valley Bank was among six of its banking partners, managing about 25% of total USDC reserves, but that didn’t do much to reassure the market. Finally, Circle confirmed late on Friday evening that $3.3 billion of its approximately $40 billion USDC reserves remained with Silicon Valley Bank.

USDC is currently trading at $0.91.

USDC/USD chart by CoinGecko

Grayscale CEO ‘encouraged’ after SEC’s argument questioned

Crypto asset management firm Grayscale was optimistic following its day in court Tuesday in its case against the U.S. Securities and Exchange Commission over the rejection of the firm’s application to convert its flagship Grayscale Bitcoin Trust (GBTC) product to a spot bitcoin ETF.

Grayscale CEO Michael Sonnenshein said the company was left “feeling encouraged” as he walked out of the courtroom following oral arguments in the case, as Judge Neomi Rao questioned the regulator’s argument, though ruling on the case may take three to six weeks.

Sonnenshein broke down Grayscale’s strategy against the SEC on Thursday’s episode of The Scoop.

GBTC was buoyed following the news, albeit briefly, trading up over 10% by Wednesday as its discount to net asset value narrowed to 35.7% before the bitcoin exposure product fell alongside the rest of the market later in the week.

Elsewhere on the regulatory front, the Biden administration proposed a 30% tax on crypto mining and a closure to crypto’s wash-trading loopholes. Meanwhile, New York State Attorney General Letitia James sued KuCoin, saying the crypto exchange is an unregistered commodities and securities broker or dealer. Importantly, the suit also lists ether as being an unregistered security.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Cathie Wood’s Ark Invest picked up a tranche of 119,429 Coinbase shares across two funds on Friday, purchasing about $6.4 million of the stock.

The investment management firm, which focuses on disruptive innovation assets, added 103,129 Coinbase shares to its Ark Innovation ETF and 16,300 shares to its Ark Next Generation Internet ETF, according to its latest trade filing.

Having already bought $3.4 million worth of shares in the crypto exchange on Tuesday and another $20 million on Thursday, Ark has added $29.8 million in Coinbase stock over the past week.

Shares in Coinbase closed at $53.44 on Friday, down 8%, valuing the latest purchase at $6.38 million.

COIN chart by TradingView

Crypto-related markets took a hit across the board this week following the collapse of crypto-friendly banks Silvergate and Silicon Valley Bank.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.