In a joint statement released by the US Treasury, Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC), it was announced that the FDIC has taken control of the assets of both Silicon Valley Bank and Signature Bank.
The move was taken to protect depositors, and all customers who had deposits in these banks will have access to their money as of March 13th. However, this has raised concerns about who is left to bank crypto companies in the US.
Depositors Protected, Equity, and Bondholders Wiped Out
The regulators have assured depositors that they will not bear any losses associated with the resolution of Silicon Valley Bank or Signature Bank. It was explained that the banks’ equity and bondholders were the ones being wiped out, as they had knowingly taken risks and lost their money when the risk didn’t pay off.
Management to be Fired, Accountability Emphasized
The joint statement emphasized that the banks’ management would be fired if the bank was taken over by the FDIC. The fourth point made by regulators was that they must get the full accounting of what happened and why, and those responsible can be held accountable.
Crypto Companies Struggle to Find Banking Partners
The FDIC takeover of these banks has left crypto companies struggling to find banking partners. Many banks are refusing to bank crypto companies, citing high risks. This is despite the fact that there are large banks that can offer crypto custody services. Even startups that are not financial services-oriented are tagged as high-risk and have limited access to the banking system.
The crypto exchanges are left to figure out how to move forward, as Okcoin has paused its USD deposits due to regulatory intervention in Signature Bank, its primary partner for customer transactions in dollars.
Crypto Market Rallies: Victory Once Again?
Bitcoin is up almost 18% in the last 24 hours, while Ethereum has also rallied. This is a clear signal from the market that a decentralized currency that allows you to become your own bank is valued in light of recent developments.
Investors are seeking a decentralized alternative as US onramps are bottlenecked. The demand for a decentralized alternative is increasing, with Binance converting the remaining $1 billion Industry Recovery Initiative fund from USD stablecoin to Native crypto, including Bitcoin, BnB, and ETH.
Bitcoin was worth $24,280 at press time, and Ethereum was at $1,670.