Crypto News: California regulators have reportedly seized Silicon Valley Bank in what could be the largest bank failure in the recent times. This news comes amid the bank’s attempts to sell itself after failed attempts to raise capital. The Silicon Valley Bank faced it difficult to raise funds as customers continued to withdraw funds. Meanwhile, the crypto market continues to show signs of contagion from this news as Bitcoin price drops slightly.
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At one point, the bank’s issues seemed out of control as the Silicon Valley Bank stock crashed around 70%, before halting on Friday.
Silicon Valley Bank Seized
The California Department of Financial Protection and Innovation appointed the appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of the deposits. The FDIC, an independent US financial agency, said it created a new entity to divert insured deposits of Silicon Valley Bank. The FDIC created an entity named the Deposit Insurance National Bank of Santa Clara (DINB). All insured deposits of Silicon Valley Bank were thereafter transferred to the DINB, it said in a statement.
The agency further said the deposits will be made available for the depositors from Monday, March 13, 2023. However, it appears there would be a different withdrawal mechanism for large depositors. Customers with accounts in excess of $250,000 should contact the FDIC, it said. The agency said it had no information on the existing Silicon Valley Bank’s deposits. It said the bank had around $209.0 billion in total assets and about $175.4 billion in total deposits as of December 31, 2022.
Meanwhile, Mike Novogratz, the CEO of Galaxy Investment Partners, found fault with the way closure of Silicon Valley Bank was handled.
I am shocked that the Fed is going to let depositors lose money in $SVB Are all banks going to be treated like hedge funds? Seems a policy mistake.
— Mike Novogratz (@novogratz) March 10, 2023
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The FDIC has a major say in the manner in which the US banks associate with crypto related activities. The agency was recently part of a joint statement that involved the US Federal Reserve. The statement stressed on risks from crypto asset related entities while recommending that banks deal with liquidity issues cautiously to be on safer side in instance like crypto crash.