Silicon Valley Bank down, USDC depegged, FTX billed $34M in Jan

Top Stories This Week

Silicon Valley Bank shut down by California regulator, holding over $5 billion for prominent crypto VCs

Silicon Valley Bank (SVB) was shut down by California’s financial watchdog on March 10 after announcing a significant sale of assets and stocks aimed at raising additional capital. The California watchdog appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver to protect insured deposits. However, the FDIC only insures up to $250,000 per depositor, per institution and per ownership category. The bank held over $5 billion in funds from major venture capital firms. Silicon Valley Bank is one of the top 20 largest banks in the United States, providing banking services to crypto-friendly venture companies, such as Sequoia Capital and Andreessen Horowitz.

USDC depegs as Circle confirms $3.3B stuck with Silicon Valley Bank

USD Coin (USDC) issuer Circle confirmed that $3.3 billion of its $40 billion USDC reserves remain at Silicon Valley Bank, triggering a sell-off that resulted in the stablecoin falling below $1. The stablecoin ecosystem felt an immediate impact as USDC depegged from the U.S. dollar, with major stablecoin depegging from the U.S. dollar as a consequence, including DAI, USDD and FRAX. The USDC price was slowly re-pegging on late Saturday after turbulent trading hours. Circle plans to cover missing liquidity in SVB with corporate funds.

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Silvergate Capital Corporation to ‘voluntarily liquidate’ Silvergate Bank

Silvergate Capital Corporation announced this week plans to “wind down operations” and liquidate its crypto arm, Silvergate Bank. The decision was made “in light of recent industry and regulatory developments,” said the company. Silvergate was one of the major banking partners for many crypto firms, but drew concerns about its solvency after delaying the filing of an annual financial report. Although its closure does not appear to be a systematic risk for the United States banking system, crypto firms are bracing for the potential effects of its exit, such as an increase in banking concentration and challenges for crypto venture capital firms in the U.S..

SBF’s lawyers signal need to push back October criminal trial

Lawyers representing FTX founder Sam Bankman-Fried have flagged that it may be necessary to delay his criminal trial, since the defense is still waiting for a “substantial portion” of evidence and more charges have been brought against Bankman-Fried in late February. Meanwhile, law firms, investment banks and consulting companies working with FTX on its bankruptcy case billed the crypto exchange a combined $34.18 million in January, court documents revealed. FTX’s chief restructuring officer and new CEO, John J. Ray III, also received a hefty pay package, charging $1,300 an hour, amounting to a total of $305,000 in February.

Biden budget proposes 30% tax on crypto mining energy use, double capital gains tax, and a ban on crypto wash sales

United States crypto miners could be subject to a 30% tax on electricity costs under a budget proposal by President Joe Biden aimed to “reduce mining activity.” According to the White House, any firm using resources — whether they be owned or rented — would be liable for a 30% taxation of the electricity cost used to mine digital assets. Another point affecting the crypto industry in the budget proposal includes ending tax-loss harvesting and nearly doubling tax rates on capital gains for some investors to 39.6% on long-term investments, up from the current 20% tax rate.

Winners and Losers

At the end of the week, Bitcoin (BTC) is at $19,920, Ether (ETH) at $0,000 and XRP at $0.35. The total market cap is at $928.9 billion, according to CoinMarketCap.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Kava (KAVA) at 12.40%, Bone ShibaSwap (BONE) at 1.22% and UNUS SED LEO (LEO) at 1.05%.

The top three altcoin losers of the week are Stacks (STX) at -31.05%, Mina (MINA) at -29.40% and SingularityNET (AGIX) at -29.14%.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“This industry has grown leaps and bounds, especially for being as young as it is, and I’m still confident that we are in the process of building a better, more equitable financial system in the United States and globally.”

Charlie Shrem, general partner at Druid Ventures

“Notwithstanding a regulatory framework around stablecoins, they’re going to be commodities in my view.”

Rostin Behnam, chairman of the U.S. Commodity Futures Trading Commission

“Without knowledge or exposure to the industry, women may lose confidence and interest in pursuing careers in the sector.”

Sandy Carter, chief operating officer and head of business development at Unstoppable Domains

“It is important that regulators foster growth in IoT and M2M payments, as it is key to maintaining the global competitiveness of the European digital economy.”

Digital Euro Association

“Despite the volatile 2022 crypto landscape, consumers didn’t lose faith in their crypto investments.”

Paxos’ Annual Survey

“As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable.”

Elizabeth Warren, U.S. senator

Prediction of the Week 

Bitcoin battles $20K as trader calls bank chaos ‘2008 all over again’

Bitcoin fell to its lowest price since mid-January on March 10 as cryptocurrency markets panicked over a potential banking crisis, data from Cointelegraph Markets Pro and TradingView shows.

The BTC/USD pair saw the majority of its losses during the previous day’s Wall Street trading as risk assets everywhere suffered setbacks courtesy of the market’s cold feet on the back of major restructuring at Silicon Valley Bank (SVB) — the United States’ 16th largest commercial lender.

“Will probably wick into 18-19k before this is over- but it’s just a retest,” pseudonymous trader Credible Crypto wrote on Twitter.

Uncertainty remains in the air as the aftermath of the meltdown at SVB is far from over — crypto stablecoins in particular are feeling the heat. USD Coin depegged from the U.S. dollar on March 11, trading at $0.93 an hour after disclosing it had $3.3 billion held SVB, triggering a domino effect on other stablecoins.

FUD of the Week 

Hedera confirms exploit on mainnet led to theft of service tokens

The team behind distributed ledger Hedera confirmed that a smart contract exploit on the Hedera mainnet led to the theft of several liquidity pool tokens. The attacker targeted liquidity pool tokens on decentralized exchanges that derived its code from Uniswap V2 on Ethereum, which was ported over for use on the Hedera Token Service. The suspicious activity was detected when the attacker attempted to move the stolen tokens across the hashport bridge. Hedera didn’t confirm the amount of tokens that were stolen.

Tether strikes at WSJ over ‘stale allegations’ of faked documents for bank accounts

The company behind stablecoin Tether has rebuffed reports claiming it had ties to entities that faked documents and used shell companies for access to the banking system. Based on leaked documents and emails, The Wall Street Journal reported that entities tied to Tether and its sister crypto exchange, Bitfinex, faked sales invoices and transactions in order to open bank accounts. Tether called the findings of the report “stale allegations from long ago” and “wholly inaccurate and misleading.” A “proud” partner of law enforcement, the firm claims to routinely and voluntarily assist authorities in the U.S. and abroad.

NY AG sues KuCoin for selling securities and commodities without registration

New York Attorney General Letitia James has filed a lawsuit against cryptocurrency exchange KuCoin after she was able to buy and sell crypto on the exchange, which is not registered in New York. James alleges that KuCoin violated securities law when it “sold, offered to sell, purchased and offered to purchase cryptocurrencies that are commodities and securities” to New Yorkers. The action is one of the first times a regulator claimed in court that ETH is a security.

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Editorial Staff

Cointelegraph Magazine writers and reporters contributed to this article.