Circle, a cryptocurrency company, has lost billions of dollars in cryptocurrency reserves due to the collapse of Silicon Valley Bank (SVB) in California. Circle had $3.3 billion of its cash reserve with the bank, which has now gone bankrupt.
The collapse of the bank has caused a significant decline in the general cryptocurrency market, particularly stablecoins. Circle has announced that the $3.3 billion it held with the now-collapsed Silicon Valley Bank will be “fully available” on a following Monday when the U.S. Banks open after the SVB closed.
The Silicon Valley Bank closure has caused a stir in the cryptocurrency industry. However, experts believe that cryptocurrency is a bystander in the bank collapses and that the banks’ failures are not related to cryptocurrency.
It is important to note that the regulatory picture of cryptocurrency in the United States is still murky, and regulators are scrambling to catch up.
The rapid emergence of cryptocurrency has led to a situation where some banks are taking an aggressive approach to bringing cryptocurrency into banks, while other agencies are slower to act.
According to a report by the International Monetary Fund (IMF), the cryptocurrency boom poses new challenges to financial stability. The report describes the risks posed by the crypto ecosystem and offers some policy options to help navigate this uncharted territory.
The total market value of all the crypto assets surpassed $2 trillion—a 10-fold increase since early 2020.
The report also noted that certain characteristics of crypto have “acutely amplified instability” within the blockchain ecosystem, including lack of basic risk controls to protect against runs, excess availability of leverage and prices that swing quickly and “appear to be primarily driven by speculation rather than grounded in current fundamental economic use cases.”
Photo credit: iGaming.org
