The recent collapse of Silicon Valley Bank (SVB) and Signature Bank has raised concerns about the fairness and sustainability of the current financial system. While the federal government has taken swift action to protect depositors and minimize damage, some have pointed out that taxpayers may ultimately bear the burden of bailing out depositors.
The stability of major stablecoins, including USD Coin, USD Digital, and DAI, was thrown into question after Circle announced that SVB had failed to transfer $3.3 billion out of a total $40 billion withdrawal request. The ripple effects of the banks' collapse are far-reaching, with numerous other entities tied to the banks facing potentially irreparable damage.
In response, US President Joe Biden has assured the public that no American taxpayer will bear the brunt of the fallout, and he is committed to holding those responsible for the event accountable. However, some of Biden's Twitter followers remain sceptical, pointing out that everything he does or touches costs the taxpayer.
The Federal Reserve is conducting a thorough investigation into the factors that led to the failure of SVB, including examining how the institution was supervised and regulated before its collapse. SVB was shut down by the California Department of Financial Protection and Innovation on March 10, with no specific reason given for its forced closure.
However, it is suspected that severe liquidity troubles stemming from major losses on government bond investments and unprecedented cash withdrawals may have led to its collapse.
It is crucial that the government takes swift action to prevent similar financial disasters from occurring in the future. By closely examining the causes of SVB's collapse, necessary reforms can be implemented to ensure the stability and security of the financial system.
CoinGecko, a leading crypto news portal, shared a detailed research report in which it highlighted the impacts of the SVB collapse on stablecoin supply. According to the report, the USDC de-pegging right after the SVB collapses directly impacted the overall stablecoin supply and market share. The total supply of both DAI and TUSD increased by 27 percent after the incident.
Overall, while the federal government has taken proactive steps to minimize damage and protect depositors, concerns remain about the potential cost to taxpayers. It is important to consider alternative solutions that can protect both depositors and taxpayers in the long run.
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