Major cryptocurrencies rallied Sunday, as the Federal Reserve announced a new emergency loan program for banks after Silicon Valley Bank, once the 16th-largest bank in the U.S., and crypto-friendly Silvergate Bank both collapsed in the past few days.
U.S. equity markets also traded higher Sunday afternoon, with the Dow futures YM00,
The Fed’s new emergency loan program will help assure banks have the ability to meet needs of all their depositors, according to a statement. Under the program, banks and other lenders will be able to pledge Treasurys and mortgage-backed securities for cash, the Fed said.
Meanwhile, U.S. financial regulators on Sunday said Silicon Valley Bank depositors would have access to “all their money” starting Monday, according to a joint statement by the Department of the Treasury, Federal Reserve, and FDIC.
Over $3.3 billion, or 8% of the $40 billion reserves of USDC, the world’s second-largest stablecoin, are held at Silicon Valley Bank, the crypto’s creator Circle said Saturday. USDC, which is supposed to trade one-to-one against the U.S. dollar, rebounded to close to $1 on Sunday, after falling to as low as 86 cents Saturday, according to CoinDesk data.
What’s pulling back the bullish sentiment is that state authorities on Sunday shut down New York-based Signature Bank, which has a number of crypto clients, according to financial regulators.
All depositors of Signature bank will be made whole, according to regulators.
The closure of Signature Bank happened after crypto-friendly Silvergate Bank said Wednesday it would wind down its operations. It might further reduce crypto companies’ access to banks, who have traditionally been reluctant to work with crypto entities, partly due to a lack of regulation, industry participants said.
Signature Bank provides deposit services for its clients’ digital assets, but does not invest in, does not trade, does not hold on its own balance sheet or provide custody of digital assets, and does not lend against or make loans collateralized by such assets, the company said.
A representative at Signature Bank declined to comment.
The unexpected closure of Signature Bank over the weekend sparked a shoot-first-ask-questions-later mentality by investors as deposits flowed to biggest banks.
Frances Yue covers the cryptocurrency market for MarketWatch.
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