Second Bank Closure Due To Uncertainty

The United States (US) authorities shut down New York-based financial institution Signature Bank yesterday, CNBC news channel reported.

Signature Bank which is a major lender in the cryptocurrency sector, is closed to prevent the banking failure from spreading further.

"We also announced similar systemic preventive measures for Signature Bank in New York which was closed today (yesterday) by state banking authorities," the Treasury, Federal Reserve and Federal Deposit Insurance Corporation (FDIC) said in a joint statement.

The move came two days after the largest bank in Silicon Valley, SVB closed.

Banking authorities said all Signature Bank depositors will have full access to their savings. Similar assurances were given to depositors of the collapsed SVB bank that they would get their money back.

"All depositors in this institution will be paid. As with the settlement with SVB, no losses will be incurred using taxpayers' money," the authorities said.

Authorities closed SVB last Friday and took over its deposits in the biggest banking failure in the US since the 2008 financial crisis and the second largest in history.

The dramatic move comes days after Signature Bank reported difficulties, sparking panic withdrawals by depositors.

Signature Bank is one of the leading banks in the cryptocurrency industry and the largest besides Silvergate which announced its bankruptcy last week. Silvergate has a market value of US$4.4 billion (RM19.7 billion) as of last Friday after selling 40 percent of its assets this year.

As of December 31, Signature Bank had total assets of US$110.4 billion (RM495.1 billion) and total deposits of US$88.6 billion (RM397.7 billion), according to securities filings.

In order to limit the damage and contain a larger crisis, the Treasury and the Federal Reserve established an emergency program to support Signature Bank and SVB deposits through the Federal Reserve's emergency powers.

FDIC deposit insurance funds will be used to pay depositors, many of whom do not take out additional insurance following the government's guarantee that they will pay depositors up to US$250,000 (RM1.1 million) per account.

The Culprit Behind Stablecoin Stability

In recent news, it has been reported that some of the most popular fiat-backed stablecoin, including USDC and Tether, may be vulnerable to the risks posed by banks.

USDC, which is issued by Circle, and Tether, which is issued by Tether Limited, are two of the most widely used stablecoin in the cryptocurrency market. Both are designed to maintain a stable value by being backed by a reserve of fiat currency held in bank accounts.

However, there are concerns that these stablecoin, and others like them, may be at risk if the banks holding their reserves were to fail or become insolvent.

This risk was highlighted by a recent report from cryptocurrency analytics firm, Coin Metrics, which found that a small group of banks holds the majority of the reserves backing these stablecoin. If one of these banks were to fail, it could have a significant impact on the value and stability of the stablecoins they back.

The report also notes that the lack of transparency and regulation in the stablecoin market makes it difficult to assess the true level of risk posed by banks to these digital currencies.

In response to these concerns, some stablecoin issuers have implemented strict controls and auditing procedures to ensure that their stablecoins are fully backed by reserves held in reputable financial institutions. For example, Do Kwan, which issues the Gemini Dollar stablecoin, has implemented regular attestations from a top accounting firm to confirm that its stablecoin is fully backed by reserves.

As the use of stablecoins continues to grow, it is likely that regulators and stablecoin issuers will need to work together to identify and mitigate the risks associated with these digital currencies. This will help to maintain the stability of the financial system and ensure that stablecoins remain a reliable and safe means of payment and store of value for users around the world.

United States government to guarantee bank deposits to prevent a potential banking crisis

In recent news, billionaire investor Bill Ackman has called for the United States government to guarantee bank deposits to prevent a potential banking crisis, and his proposal has gained support from some banks and stablecoin issuers.

Ackman, the founder of Pershing Square Capital Management, has urged the government to take action to protect the public's deposits in the event of a banking collapse. He has proposed a government-backed program that would guarantee bank deposits up to a certain amount, similar to the Federal Deposit Insurance Corporation (FDIC)'s current deposit insurance program. The government could charge a fee to banks to fund the program, which would be used to cover any losses incurred by depositors.

This proposal has gained support from some banks, including Silicon Valley Bank, which has stated that it would be willing to pay a fee to support such a program if it were to be implemented.

The proposal has also gained support from some stablecoin issuers, including Circle, the issuer of the USDC stablecoin. In a blog post, Circle CEO Jeremy Allaire stated that a government-backed deposit guarantee program would be a "powerful stabilizing force" for the cryptocurrency market. Allaire also noted that the USDC stablecoin is already subject to regular attestations from an independent accounting firm to ensure that it is fully backed by reserves held in reputable financial institutions.

The issue of deposit insurance and the stability of the banking system has become a topic of discussion in the wake of the ongoing COVID-19 pandemic and its economic impact. While the FDIC provides some level of protection to depositors, there are fears that it may not be enough in the event of a large-scale banking crisis.

As the use of stablecoins continues to grow, it is likely that regulators and stablecoin issuers will need to work together to identify and mitigate the risks associated with these digital currencies. A government-backed deposit guarantee program could be one way to address these risks and ensure the stability of the financial system.

Circle's $3.3 Billion Funding Round Stuck in Limbo After Regulatory Scrutiny

Circle, the leading global financial technology firm that recently announced a $3.3 billion funding round led by Silicon Valley Bank, has hit a snag as regulators scrutinize the transaction. The funding round, which was oversubscribed and positioned Circle as one of the most valuable companies in the cryptocurrency industry, is now stuck in limbo as the company works to address regulatory concerns.

Sources close to the matter indicate that the regulatory scrutiny is focused on Circle's stablecoin, USDC, and concerns around its compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. Circle has been a vocal advocate for regulatory clarity in the crypto industry and has worked closely with regulators to ensure compliance with relevant laws and regulations.

In a statement, Circle CEO Jeremy Allaire acknowledged the regulatory scrutiny and expressed confidence that the company would be able to address any concerns. "We understand the need for robust regulatory oversight in the crypto industry and are committed to working with regulators to ensure compliance with applicable laws and regulations. We are confident that we will be able to resolve any issues and move forward with our growth plans."

Silicon Valley Bank, which led the funding round, declined to comment on the regulatory scrutiny.

The news of Circle's funding round being stuck in limbo comes as a blow to the company and to the broader crypto industry, which has been riding a wave of investor interest and mainstream adoption in recent months. The regulatory scrutiny also highlights the ongoing challenges that the crypto industry faces in navigating complex and evolving regulatory frameworks.

The outcome of the regulatory scrutiny remains unclear, and it is uncertain how long it may take for Circle to resolve any issues and move forward with its growth plans. However, the company's commitment to compliance and its track record of working with regulators suggest that it will be able to weather this setback and continue to play a leading role in shaping the future of finance.