<\/p>\n
On March 10, after days of uncertainty spurred on by $1.8 billion in surprise bond losses<\/a>, Silicon Valley Bank (SVB) collapsed, sending a tidal wave\u2019s worth of ripple effects throughout the financial industry. The event quickly prompted the U.S. Treasury, Federal Reserve, and the FDIC to step in to effectively circumvent catastrophe<\/a> and assure depositors of access to all of their funds, whether insured or not.<\/p>\n While the situation is still developing, the seeming fiasco has left those in traditional finance to shudder in remembrance of the 2008 financial crisis. Yet, the context of the collapse \u2014 that SVB was a significantly popular choice for venture capitalists and tech startups \u2014 has urged more contemporary investors (like those in Web3) to remark about the potential of decentralization in eschewing central bank issues. <\/p>\n But even so, in the days since the debacle, it\u2019s become clear that the NFT space might\u2019ve actually dodged a bullet itself with help from regulators. Because while Web3 staunchly purports to be decentralized, some of the most prominent players seemingly only narrowly escaped being caught up in the debacle.<\/p>\n How did the 16th largest bank in the United States become the second-biggest bank failure in U.S. history? To summarize, the collapse came down to two major factors. <\/p>\n The first is that, within the last year, the Federal Reserve has raised the Federal funds rate by nearly five percentage points<\/a> in an attempt to tame inflation. These higher interest rates significantly chipped away at the value of long-term bonds that SVB and many other banks took on previously when interest rates were next to nothing.<\/p>\n The second factor concerns the quick and broad decline in tech revenue<\/a> and venture capital<\/a> experienced within the U.S. In response to the wane, startups had opted to withdraw funds held in SVB, meaning that the bank was facing significant unrealized losses in bonds while simultaneously, customer withdrawals were escalating. This, in turn, caused a run on the bank where customers panicked and all attempted to withdraw their money at once.<\/p>\n Only two days after the SVB closure, the Department of the Treasury, Federal Reserve, and FDIC released a joint statement<\/a> saying that \u201cdepositors will have access to all of their money starting Monday, March 13,\u201d and that no losses associated with the resolution of SVB would come from taxpayer dollars. <\/p>\n The statement also mentioned that regulators took these unusual steps because SVB presented a significant risk for the U.S. economy. While regulators continue to look for a buyer for SVB<\/a> and the uncertainty for what comes next is mounting, HSBC has acquired SVB UK<\/a> for a symbolic \u00a31. <\/p>\n Outside the traditional finance world, those in the blockchain industry are doing their best to understand how the situation might have, and could still, affect their stomping grounds.<\/p>\n Not to be confused with the fall of FTX<\/a>, this latest three-letter acronymous fiasco had a significantly less detrimental effect on the NFT space than the aforementioned failed crypto exchange. Thanks to the actions of the Federal Reserve and FDIC, the many accounts housed under SVB \u2014 which included consumer accounts as well as those of high-profile companies like Roblox, Buzzfeed, Etsy, and more<\/a> \u2014 were made whole as of March 13. <\/p>\n But the fact remains that the SVB collapse could\u2019ve very <\/em>significantly affected the blockchain industry. Because apart from crypto companies like Avalanche, BlockFi, Ripple, Pantera, and others that had funds locked up in the SVB debacle, numerous NFT adjacent entities would\u2019ve been in for a world of hurt as well. Here are a few examples.<\/p>\n One of the most immediate and impactful concerns arose from the untethering of the USDC stablecoin. USDC lost its 1\/1 peg to the U.S. dollar only hours after SVB was closed, and Circle\u2019s $3.3 billion cash reserves<\/a> (about eight percent of the funds backing USDC) went into limbo. Although the situation has since been rectified, USDC has yet to return to the $1 peg as Signature Bank (another institution critical to USDC holdings) was seized<\/a> in the wake of a similar bank run.<\/p>\nWhat happened<\/h2>\n
Who could\u2019ve been affected?<\/h2>\n
Circle<\/h4>\n
Proof<\/h4>\n