With the failure of two US banks, the value of some banks’ shares fell globally. You can tell the government is taking a financial catastrophe seriously when the US president personally goes out of his way to assure citizens that their money is secure.
However, Joe Biden’s guarantees on Monday weren’t simply for the clients of the two collapsed banks. Wider repercussions affect both the US and the rest of the world.
SVB and Signature Bank
After Silicon Valley Bank (SVB) and Signature Bank failed, these are the top five queries.
US authorities shut down Silicon Valley Bank on Friday after seizing its assets. Silicon Valley Bank specialized in lending to technology companies. It was a US bank’s worst failure since the 2008 financial crisis.
It had been making an effort to raise cash to make up for a loss on the sale of assets that had been negatively impacted by rising interest rates.
As soon as customers learned about the issues, they hurried to the ATMs, which led to a lack of cash. On Sunday, authorities also took possession of the Signature Bank in New York. This organization was considered the most vulnerable.
SVB and Signature Bank are both industry specialists. Additionally, they were overexposed to assets whose values were being threatened by rising interest rates.
According to Sheila Warren, CEO of the Crypto Council for Innovation, recent pronouncements from regulators appear to equate to de facto restrictions on interacting with all crypto enterprises, regardless of their business methods.
A prohibition on banking access, according to Warren, would signify that the US is choosing not to be competitive in the tech field and would prefer that unregulated parts of the economy and other countries lead, marking a sea change for the approach to innovation and entrepreneurship in the US.
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Signature Bank” Problems
The problems at Signature Bank had been building for some time; last month, investment and algorithmic trading firm Statistica Capital filed a class-action lawsuit against the bank, alleging that it had enabled the activities of the defunct digital asset exchange FTX.
The Nasdaq later stopped trading in the bank’s shares after crypto-friendly bank Silvergate announced its liquidation. As a result, Signature’s stock price plummeted.
Yet, according to unidentified sources, the bank’s management was taken aback by the New York regulators’ choice to seize it.
Particularly following the November collapse of the major digital asset exchange FTX, regulators and lawmakers have been harshly cracking down on the world of digital assets recently.
US lawmakers demanded details on US banks’ connections to cryptocurrency in a letter to Federal Reserve Chairman Jerome Powell back in December.
Democratic senators Tina Smith of Minnesota and Elizabeth Warren of Massachusetts both specifically mentioned Signature Bank and Silvergate, which voluntarily shut down last week, in their warning about the connections between traditional banks and cryptocurrency.
Since then, banks with ties to the cryptocurrency industry have encountered issues, notably Long’s Custodia, which was refused membership in the Federal Reserve System in January by the American Federal Reserve Board. The Fed is currently being sued by Custodia for its refusal.
