The sudden fall of the American bank Silicon Valley Bank (SVB) on Friday has major consequences for companies. But the crypto world has also been affected. Although the US government has taken over the bank and guarantees deposits of up to USD 250,000 (about EUR 235,000), the vast majority of the deposits with the bank were much higher. The company did a lot of business with tech start-ups.
Roku, a maker of smart boxes that TV viewers can use to watch streaming services, among others, reported having a lot of money in the SVB account. This is just over a quarter of all cash the company had. Roku said it did not know how much of that money it would see again, but indicated that it still had enough money to last a year.
Other tech companies may also run into problems. If they cannot access their credits, it will be more difficult to pay salaries, for example.
Cryptocurrency
The well-known crypto coin USD Coin is also getting into trouble. Circle, the company behind that digital currency, announced that it has 3.3 billion dollars (3.1 billion euros) in credit balances with SVB. Circle needs that money to guarantee the value of USD Coin. The crypto coin is a so-called stablecoin, the value of which is guaranteed by the equivalent value in normal currency.
Circle had to let go of that link to the dollar and the value of a USD Coin fell from 1 dollar to 0.89 dollar cents. Various crypto exchanges such as Binance and BlockFi have halted trading in the currency. USD Coin was worth 36 billion dollars (34 billion euros) before the problems.
Bank run
The problems at SVB were caused by a bank run. The American bank had invested a lot of money in government bonds in recent years, but due to the deteriorating economic situation, many of the bank’s customers wanted more of their money. If SVB sold the government bonds before the end of the term, the bank received much less money due to the increased interest. That is why the bank wanted to raise money with a share issue, but that report led to unrest among customers.
On Friday, those customers promptly tried to withdraw 42 billion dollars (39 billion euros) from their accounts, after which the American authorities intervened. Credits up to $ 250,000 are therefore paid out, anything above that depends on the sale of SVB or parts of it.
British branch also closed
The British branch of SVB will also be closed, British regulators announced. The British branch can no longer meet its payment obligations without the support of the parent company. Account holders in the United Kingdom will receive credits of up to £85,000 (96,000 euros) under the applicable rules, or £170,000 (192,000 euros) for joint accounts.
American Silicon Valley Bank in trouble: suddenly fear of a new credit crisis rears its head
US Silicon Valley Bank is closed by authorities
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