Silicon Valley Bankruptcy Hits Companies and the Crypto World | money

The sudden fall of the US Silicon Valley Bank (SVB) on Friday had disastrous consequences for the companies. But the crypto world was also affected. Although the bank was taken over by the United States government and guaranteed deposits of up to $250,000 (about €235,000), 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 TV viewers can use to watch streaming services, among other things, has reported a lot of money in the SVB 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

The popular cryptocurrency USD Coin is also in trouble. Circle, the company behind that digital currency, announced that it has $3.3 billion (€3.1 billion) in credit balances with SVB. Circle needs this money to guarantee the coin’s dollar value. A cryptocurrency is what is called a 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. A dollar coin was worth $36 billion (34 billion euros) before the troubles.

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bank run

The problems at SVB were caused by the bank’s operation. The American bank has invested a lot of money in government bonds in recent years, but due to the deteriorating economic situation, many bank 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 customers.

Those clients immediately tried on Friday to withdraw $42 billion (39 billion euros) 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.

The British branch also closed

The British regulators announced that the British branch of SVB would be closed. The British subsidiary could no longer meet its payment obligations without the support of the parent company. UK account holders will receive credits of up to £85,000 (€96,000) under applicable rules, or £170,000 (€192,000) for joint accounts.

The US Silicon Valley bank is in trouble: suddenly the fear of a new credit crisis rears its head

The US Silicon Valley bank has been shut down by the authorities

Megan Vasquez

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