Major cryptocurrencies stabilise after U.S. intervenes on SVB
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[March 13, 2023] By
Tom Wilson and Shubham Kalia
LONDON (Reuters) -Major cryptocurrencies stabilised on Monday after U.S.
authorities announced plans to limit the fallout from the collapse of
Silicon Valley Bank (SVB) and the issuer of the USD Coin stablecoin said
it remained redeemable with the dollar.
U.S. authorities launched emergency measures on Sunday to shore up
confidence in the banking system after the failure of SVB threatened to
trigger a broader financial, and said SVB customers would have access to
their deposits from Monday.
USD Coin, also known as USDC, recovered to $0.9917, up from a record low
of $0.87 hit on Saturday, far below its intended peg of 1:1 against the
dollar. The fall was sparked by concerns on the exposure of Circle — the
U.S. firm that issues USDC — to SVB.
Top cryptocurrency bitcoin, meanwhile, slipped 0.3% to $22,125 on Monday
morning, but was still up around 8% from Sunday's lows.
Jeremy Allaire, CEO of USDC issuer Circle, said in a tweet on Sunday
that the company's $3.3 billion USDC reserves deposit - about 8% of its
total - held at the collapsed SVB Bank would be fully available when
U.S. banks open on Monday.
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"Circle's USDC operations will open for business, including with new
automated settlement via our new partnership with Cross River Bank,"
Allaire said.
New Jersey-based Cross River did not immediately respond to a request
for comment.
Stablecoins such as USDC, the second-largest by market size, are a
crucial cog in the world of crypto trading. They are designed to keep a
steady value, and are typically backed by reserves of traditional assets
such as dollars, bonds or gold.
Stocks exposed to crypto also rallied.
In U.S. premarket trading, crypto miners Riot Blockchain and Marathon
Digital, crypto exchange Coinbase Global and software developer
MicroStrategy Inc also rebounded from last week's lows to gain between
6.5% and 10%.
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A representation of virtual currency
Bitcoin is seen in front of a stock graph in this illustration taken
January 8, 2021. REUTERS/Dado Ruvic/File Photo
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Analysts, warned that market sentiment would remain skittish despite
the U.S. measures.
"Markets remain unsettled from the SVB failure," said Alvin Tan,
head of FX strategy at RBC Capital Markets in Singapore. "The
situation is evolving, but volatility looks set to remain elevated
in coming days."
CRYPTO BANKING
The relief for crypto was tempered by New York's chief financial
regulator taking possession of Signature Bank, a key banking firm
for crypto companies.
With the fall of SVB and California-based Silvergate Bank, its
closure means that three of the main U.S. banks used by crypto
businesses have failed this year.
Shares of Signature Bank were halted for trading, with U.S.
officials saying depositors of Signature Bank would be made whole at
no loss to the taxpayer.
Its fall represents another blow to connections between the crypto
and banking sectors, already strained by a growing U.S. regulatory
crackdown.
Top U.S. exchange Coinbase Global Inc tweeted on Sunday that after
Signature's fall it was "facilitating all client cash transactions
with other banking partners," without elaborating.
Coinbase said that as of Friday's close, it had an approximately
$240 million balance in corporate cash at Signature, but expects to
fully recover the funds.
(Additional reporting by Tom Wilson and Elizabeth Howcroft in
London, and Medha Singh, Shubham Kalia and Baranjot Kaur in
Bangalore; Editing by Kim Coghill, Jacqueline Wong and Uttaresh
Venkateshwaran)
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