Yellen Works with Regulators to Address Silicon Valley Bank Collapse

On March 10, 2023, California’s financial watchdog shut down Silicon Valley Bank (SVB) following an announcement of a significant sale of assets and stocks to raise $2.25 billion in capital to shore up operations. As a result, the Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver to protect insured deposits. While the FDIC only insures up to $250,000 per depositor, per institution, and per ownership category, concerns are mounting about the impact of the collapse of SVB, particularly on small businesses that employ people across the country.

In response to the situation, United States Treasury Secretary Janet Yellen is working with regulators to address the collapse of SVB. In a recent interview with CBS News, Yellen stated that they are designing “appropriate policies to address the situation” at the bank. She also noted that they are not considering a major bailout, citing the reforms that have been put in place since the financial crisis. However, Yellen emphasized that they are focused on protecting depositors and are working with regulators to address their concerns.

One of the challenges facing depositors is the fact that most accounts at SVB are unsecured. Yellen acknowledged this issue and stated that regulators are “very aware of the problems that depositors will have.” She also expressed concern about the possibility of contagion to other regional American banks, stating that “the goal always is supervision and regulation is to make sure that contagion can’t- can’t occur.”

SVB is one of the top 20 largest banks in the United States and provides banking services to many crypto-friendly venture firms. According to a Castle Hill report, assets from Web3 venture capitalists totaled more than $6 billion at the bank, including $2.85 billion from Andreessen Horowitz, $1.72 billion from Paradigm, and $560 million from Pantera Capital. Yellen’s comments indicate that regulators are well aware of the significance of the collapse of SVB and are working to mitigate its impact.

Regarding the options available to the FDIC, Yellen noted that they are considering “a wide range of available options,” including acquisitions from foreign banks. She also emphasized that they are working to address the situation in a timely way.

In conclusion, Yellen’s remarks highlight the seriousness with which regulators are approaching the collapse of SVB. While a major bailout is off the table, protecting depositors, particularly small businesses, is a top priority. Regulators are exploring a range of options, including acquisitions from foreign banks, to address the situation and prevent contagion to other regional American banks.


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US Treasury Secretary Yellen Optimises to Recognize Crypto Role in Finance

In an interview with CNBC on last Friday, US Secretary of the Treasury Janet Yellen acknowledged crypto’s rising role in American finance.

Yellen said that she will work towards creating guidance for future regulation that supports innovation in the crypto space.

In the interview, Yellen told CNBC, “there have been benefits from crypto and we recognize that innovation in the payment system can be a healthy thing. We would like to come out eventually with recommendations that will create a regulatory environment [for] innovation.”

However, she stated that still there are some concerns over crypto assets related to consumer and investor protection, financial stability, and their use in illicit transactions.

Yellen disclosed that she will continue working with the Treasury Department to issue recommendations on the use of cryptocurrencies, which could help develop a regulatory environment that promotes innovation.

Responsible Innovation

Yellen is often seen as an enemy of crypto, but that is not so. Most of her issues appear to be with the use and misuse of existing digital currencies, rather than with the overall concept of cryptocurrency.

In her public remarks, Yellen has shown her desire to preserve crypto’s potential for productive innovation while eliminating its harmful impact on society. She has helped to set the tone for how the U.S. government deals with cryptocurrency and crypto brokers. She seems to agree with the need for some sort of formal regulations around digital currencies.

In February last year, Yellen raised her concerns about Bitcoin’s “highly speculative” nature, use in “illicit” activities, and protection for investors. She noted her worry about potential losses that investors could suffer under the volatility in crypto.

In May last year, Yellen’s Treasury Department detailed plans to have any crypto transfers of at least $10,000 be reported to the Internal Revenue Service (IRS). The report is part of the Biden administration’s plans to beef up the IRS in hopes of collecting more tax revenue that goes unreported.

Early this month, Yellen praised President Joe Biden’s historic executive order on cryptocurrency. In a statement, Yellen said that the approach will support responsible innovation that could result in significant benefits for the country, businesses, and consumers.

Image source: Shutterstock


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US Treasury Secretary Janet Yellen Weighs In on Central Bank Digital Currencies

U.S. Secretary of the Treasury Janet Yellen says she has yet to make up her mind about whether the US should implement a central bank digital currency (CBDC) or not.

Yellen says in a new interview with Reuters that she’s waiting on the Federal Reserve to publish an evaluation on CBDCs.

She notes Fed Chairman Jerome Powell has promised the report will be produced “very soon.”

As for her personal opinions on the matter, the Treasury secretary says she sees both pros and cons to implementing a CBDC.

“There are some benefits, but there are also meaningful costs… It can work to disintermediate the banking system, and we need to work through the pros and cons. I don’t have a view yet.”

Yellen notes that whatever is decided on CBDCs will need to “command a consensus” from various arms of the US government.

“I think it’s important to understand what the Fed’s view is – they agree this is a decision that is one where we need to have consensus.

They will want to know what the administration’s view is on this, and frankly, we haven’t discussed this yet in a serious way in the White House. And Congress is going to weigh in on this, too.”

Powell said this summer that he’s focused on execution rather than speed when it comes to developing a CBDC.

Yellen tells Reuters that she has no plans to leave the Treasury posting any time soon.

“I have no plans to leave this job.

I’m enjoying it very much and we’ve got a huge amount of important work to do, so I have no plans to leave Treasury any time soon.”

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Which stablecoins were actually ‘stable’ during this week’s sudden Bitcoin price crash?

A sharp sell-off across the cryptocurrency market Tuesday—that saw top tokens like Bitcoin (BTC), Ether (ETH), Cardano (ADA), and Solana (SOL) fall by double-digital percentages—created a venue for stablecoins to prove their worth.

The fixed-price cryptocurrencies offered interim protection to traders from the notorious crypto price volatility. They did so by almost maintaining their one dollar-peg and offering sufficient liquidity to traders that looked for a safety net during the market decline.

Blockchain analytics service CryptoQuant reported dramatic spikes in the stablecoin transfers as the cryptocurrency market cap fell from $2.38 trillion to $2.103 trillion on Tuesday.

For instance, Tether, the leading stablecoin by volume, processed $10.51 billion worth of transactions on Tuesday compared to $4.02 billion on Monday.

The mean of all stablecoins transfer. Source: CryptoQuant

Similarly, the second-largest stablecoin USDC, backed by Circle, reported $5.728 billion worth of transfers on Tuesday versus $3.27 billion in the previous session, logging a 74% spike.

At the same time, the net stablecoin supply in circulation remained relatively idle, around $67 billion, showcasing adequate liquidity against demand even in the face of a brutal crypto market decline. As a result, many top stablecoins maintained their 1:1 dollar peg despite logging minor price drifts.

Centralized stablecoin more dependable

Among the top-10 stablecoins that showed minimal average deviation from their one dollar peg included six centralized, two mixed, and two algorithmic projects.

USDC demand pushed its average valuation by about $0.00196 above a dollar, closely followed by Paxos (PAX), which traded $0.00203 above the same peg.

Top 10 stablecoins ranked according to their average deviation from the US dollar. Source: Larry Engineer’s stablecoin tracker

Similarly, Binance exchange’s native stablecoin BUSD and MakerDAO’s DAI maintain their stability via a dynamic system of Collateralized Debt Positions (CDPs), autonomous feedback mechanisms, and a variety of user incentive structures, was up $0.00244 from its dollar peg. 

Tether’s wider demand across the cryptocurrency spectrum also pushed its average deviation up by $0.00244.

Related: Tether promises an audit in ‘months’ as Paxos claims USDT is not a real stablecoin

Meanwhile, TrustToken’s TUSD, Stable Universal’s HUSD, and Terra’s UST drifted $0.00249-0.00385 from their dollar valuation. FRAX and FEI posted decoupled from their dollar peg by jumping $0.00404 and $0.00474 above it, respectively.

The data snapshot was taken 24 hours after the Sept. 7 crypto market crash.

Stablecoin collapse good for Bitcoin? 

But potential stablecoin risks have also attracted the attention of top U.S. officials, including Treasury Secretary Janet Yellen and Boston’s Federal Reserve’s President Eric Rosengren.

In July, Yellen “underscored the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” in a meeting with the heads of the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

Related: Stablecoin growth could affect credit markets, rating agency warns

Meanwhile, Rosengren called Tether a potential challenge to financial stability.

In July, a paper released by Fitch Ratings also noted that collateralized stablecoins could trigger short-term credit market contagion. Excerpts:

“A sudden mass redemption of [tether] could affect the stability of short-term credit markets […] particularly if associated with wider redemptions of other stablecoins that hold reserves in similar assets.”

But what does a stablecoin market collapse could mean for Bitcoin and similar digital assets? Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, said it would benefit Bitcoin, in particular.

“If the whole market collapse, there is only one safe store of value left: Bitcoin.”

For more about the potential risk of stablecoins, check out Cointelegraph’s latest video report.

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