- Silicon Valley Bank collapse may impact small banks in the US
- Nearly a third of US deposits held in small banks, half uninsured
- Petition urges regulators to act swiftly to prevent job losses and bank run risk
A former Bridgewater executive and CEO of investment firm Unlimited, Bob Elliot, warns that the Federal Reserve and FDIC decisions about the future of Silicon Valley Bank (SVB) may impact small banks across the United States. According to Elliot, a potential failure of the tech bank could result in a risk of a bank run, putting trillions of dollars in assets at stake.
Nearly a third of deposits in the US are held in small banks, and 50% of those deposits are uninsured. Elliot’s comments on Twitter have prompted social media reactions, with many fearing the potential impact of the collapse of SVB. A petition from YCombinator CEO Garry Tan reveals that around 40,000 depositors at Silicon Valley Bank are small businesses.
The petition urges regulators to act and implement a backstop for depositors, warning that failure to act swiftly could lead to job losses for over 100,000 people. The FDIC and Federal Reserve have reportedly been discussing creating a fund to backstop deposits at troubled banks. This fund is a response to the SVB collapse and aims to reassure depositors and reduce panic.
Silicon Valley Bank ranks as one of the largest 20 banks in the United States, providing banking services to various crypto-friendly venture firms. Blockchain VCs assets valued at more than $6 billion at the bank, including Andreessen Horowitz ($2.85 billion), Paradigm ($1.72 billion), and Pantera Capital ($560 million).
In other news, users of Circle USD (USDC) will be able to redeem $1 for every USDC they possess, according to an announcement made a couple of hours ago by its issuing business.
The recent bank run at Silicon Valley Bank (SVB) triggered widespread panic and exodus among enterprises with exposure to the institution. Circle is unfortunately one of them. Nonetheless, the business guarantees that once normal banking operations resume on Monday, USDC holders will be able to exchange their stablecoin for U.S. dollars at a rate of 1:1.
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