Banking Collapse Sends Shockwaves Through Crypto and NFT Gaming: Analyzing the Fallout from SVB Demise
The collapse of SVB, Silvergate, and Signature Bank is a significant blow to the crypto industry and could have far-reaching consequences.
Crypto and NFT companies are bracing for the impact of the recent collapse of Silicon Valley Bank (SVB), Silvergate Capital, and Signature Bank. SVB, a major lender to startups in Silicon Valley, collapsed after depositors withdraw over $42 billion. Regulators seized Signature Bank, while Silvergate Capital announced that it would be winding down operations and liquidating its bank. These banks were the main lenders to crypto companies. Nearly half of all U.S. venture-backed startups had cash with SVB, including some digital asset firms and crypto-friendly venture capital funds.
Impact on Gaming and NFTs
The collapse of these banks is affecting not just the tech and crypto industries but also the gaming industry. Gaming companies like Roblox have $150 million trapped in SVB. Further, the NFT platform Proof Collective seems to have taken a big hit from the collapse. The Web3 project is behind the well-known NFT collection Moonbirds.
Questions over Corporate Governance
In a twist to the SVB saga, employees reportedly received their annual bonuses just hours before regulators seized the bank. This raises questions about corporate governance and the accountability of all banks. There is still no confirmation regarding the payout amounts, but SVB incentives vary from roughly $140,000 for managing directors to $12,000 for associates, according to Glassdoor.com.
Crypto Companies' Exposure
Crypto companies, including Circle, Ripple, and Avalanche, have exposure to failed banks. Circle has $3.3 billion of its $40 billion reserves trapped in SVB. Ripple had some exposure to SVB as a banking partner and had some of its cash balance.
Also, Avalanche has some exposure.
However, the largest stablecoin by market cap, Tether, announced that it had no exposure to SVB. Changpeng Zhao, the CEO of cryptocurrency exchange Binance, stated that the company had no exposure to SVB.
Recently, Animoca Brands issued a clarification to its shareholders that it does not bank with Silvergate Bank (NYSE: SI) or Silicon Valley Bank (NASDAQ: SIVB). The company maintains multiple banking relationships globally and is carefully monitoring balances.
It is quite a relief for many since Animoca Brands develops and publishes a broad portfolio of products, including original games such as The Sandbox, Crazy Kings, and Crazy Defense Heroes, as well as products that utilize popular intellectual properties such as Disney, WWE, Snoop Dogg, The Walking Dead, Power Rangers, MotoGP™, and Formula E.
In related news, Star Atlas, a blockchain-based gaming platform, has released a community announcement regarding recent developments that have led to significant volatility in the price of USDC. The announcement emphasizes that ATMTA, Inc., the parent company of Star Atlas, did not have any accounts at Silvergate or Silicon Valley Bank and does not have any material exposure to USDC.
However, as a precautionary measure, Star Atlas has decided to remove its NFT sales that were denominated in USDC on the Galactic Marketplace due to the significant volatility in the price of USDC. The Galactic Marketplace operates on a peer-to-peer basis, and as such, users' existing orders cannot be modified or cancelled. Star Atlas urges all users of the Galactic Marketplace to exercise caution and consider the risks of maintaining any orders in USDC. Orders denominated in ATLAS, Star Atlas's native token, are unaffected by these developments, and the company may explore activating other token denominations on the Galactic Marketplace. Star Atlas promises to provide additional updates as they become available.
Customers will get their Money Back
The Federal Reserve announced that all customers would get their money back in full. It will include even those customers with deposits in excess of the insured amount of $250,000. The bank will reopen under the Deposit Insurance National Bank of Santa Clara, despite Treasury Secretary Janet Yellen initially saying there would be no federal bailout. This shift reflects fears that banking industry contagion might spread throughout the entire banking industry in the United States.
Crypto Trading Disrupted
The closure of SVB, Signature Bank, and Silvergate Bank is disrupting cryptocurrency trading. Cryptocurrency has almost always been traded on a 24/7 basis, but that is no longer a certainty due to the ongoing crisis with crypto-adjacent banks. The closure of these banks, which were known for being friendly towards cryptocurrency and providing payment systems that operated round-the-clock, could create bottlenecks that hamper the growth of the industry.
Okcoin, for example, relied on Signature Bank for U.S. dollar deposits. They have temporarily halted USD deposits by wire, crypto transactions by credit card, and other services. While crypto is touted as largely independent from traditional banking, it still relies on the traditional financial system for many key functions, including institutions like Signature Bank.
Stablecoins, which are designed to stay stable because they have matching amounts of value in reserve, could potentially go into freefall if the reserve amount of money cannot be accessed. This is because if there is a lack of options to allow customers to use normal fiat currency to buy crypto and then exchange it back to fiat currencies, it could create bottlenecks that hamper the industry's growth.
Conclusion
The collapse of SVB, Silvergate, and Signature Bank is a significant blow to the crypto industry. It has disrupted cryptocurrency trading and potentially created bottlenecks that could hamper the growth of the industry. Moreover, the collapse has hit gaming and NFT companies hard, and people have raised questions about all banks' corporate governance and accountability. What is your opinion on this matter? Do you think this collapse could cause another crash in the crypto market like it did at the time of FTX?
