With the Fed's hand, the market has turned upside down.
The Treasury, Federal Reserve and FDIC issued a joint statement,
full text:
Today, we are taking decisive action to protect the American economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital role in protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.
After receiving advice from the FDIC and the Fed's Board of Directors, and in consultation with the President, Yellen approved actions that would enable the FDIC to complete its resolution of SVB in Santa Clara, California, in a manner that adequately protects all depositors. From Monday, March 13, savers will have access to all their money. Losses related to SVB's resolution will not be borne by taxpayers.
We also announced a similar systemic risk exception for Signature Bank of New York, which was closed today by its state charter. All depositors at the institution will be recovered in full. As with the SVB resolution, taxpayers will bear no losses.Shareholders and certain unsecured debtors will not be protected. Senior executives have also been removed. Any losses suffered by the deposit insurance fund to support uninsured depositors are covered by a special assessment of banks, as required by law.
Finally, the U.S. Federal Reserve announced Sunday that it will provide additional funding to eligible depository institutions to help ensure banks have the capacity to meet the needs of all depositors.The U.S. banking system remains resilient and on solid footing, thanks in large part to reforms enacted after the financial crisis to ensure better banking security. These reforms, combined with today's actions, demonstrate our commitment to take the steps necessary to keep savers' savings safe.
Read the original text:
https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm
Subsequently, USDC has been anchored to 0.99, and the crisis of USDC seems to have been lifted.
Circle claims:
We are pleased to see the U.S. government and financial regulators taking key steps to mitigate the risks posed by parts of the banking system. 100% deposits from SVB are safe and open for business tomorrow. The 100% USDC reserve is also safe and secure, and we will complete the transfer of the remaining SVB cash to BNY Mellon. As previously mentioned, USDC Liquidity operations will resume tomorrow morning when banks open. With the closure of Signature Bank announced tonight, we will not be able to process minting and redemption through SigNet and we will be relying on BNY Mellon for settlement. As soon as tomorrow we will be introducing a new transaction bank partner with automatic minting and redemption. We are committed to building robust and automated USDC settlement and reserve operations with the highest quality and transparency. We have long advocated for full-reserve digital currency banking, insulating the base layer of our internet money and payments system from the risks of fractional-reserve banking. In fact, the Stablecoin Act remains a very active pursuit in Congress, and it would enshrine in law a system under which Stablecoin funds would be held as cash at the Federal Reserve and in short-term Treasury bills. We need this law now more than ever if we want a truly safe financial system.
Coinbase issued a statement saying that despite the recent turmoil we have seen in the traditional banking industry, Coinbase continues to operate as usual. At Coinbase, all customer funds continue to be safe and accessible, including USDC conversions that will resume on Monday. All customer cash at the bank continues to be protected by FDIC pass-through insurance. Due to the FDIC suspension of transactions at Signature, we are currently facilitating cash transactions for all customers with other banking partners.
CZ expresses a critical point: Once you do a bailout, you are in a dilemma. "Protect consumers" by diluting all citizens. If you do a bailout, there is zero incentive for banks to manage risk. When you fail, you are bailed out. Bailouts encourage greater and greater risk-taking, which requires more bailouts.
The US industry is generally concerned about the closure of SIGNATURE.
Frank Chaparro, editor-in-chief of The Block, said that with the closure of the Signature Bank encryption-friendly bank, Crypto's capital market basically returned to before 2014. Any newly formed company does not have access to banking relationships. In many ways, cryptocurrencies have officially become the unbanked. This will make the banking situation for cryptocurrency companies extremely difficult and absolutely brutal. According to Bloomberg, a person familiar with the company's operations said the decision to place Signature in receivership came as a surprise to its managers, who found out about the announcement shortly before it was released. The bank faced a massive outflow of deposits on Friday but had stabilized by Sunday, said the person, who asked not to be identified discussing private matters.
In addition, the follow-up macro trend also confuses the outside world.
After this round of bailouts, the CME FedWatch Tool showed that nine days later the Fed FOMC’s forecast for a 50bps rate hike has fallen from 40% a day ago to 17.4%; 82.6% of the forecasts are for a 25bps rate hike. The United States will announce February CPI on Tuesday, which will completely determine the extent of the interest rate hike.
