The cryptocurrency business is thriving, but a lot of things are happening, including, Silicon Valley Bank – the biggest bank crash since 2008, the Biden administration proposing a 30% crypto mining tax, Thailand offering tax breaks to firms issuing investment tokens, and much more!
In this issue:
- Silicon Valley Bank (SVB) – the biggest bank crash since 2008.
- UK tech industry in turmoil as Silicon Valley Bank UK collapses, emergency cash lifeline.
- Circle’s USDC instability causes a ‘Domino effect’ on DAI and USDD stablecoins.
- Hedera confirms the exploit on Mainnet led to the theft of service tokens.
- Thailand to offer tax breaks to firms issuing investment tokens.
- Biden administration proposes a 30% crypto mining tax, closing wash-trading loopholes.
Before we continue with the newsletter, don’t forget to follow me on Twitter (@AltCryptoGems, @AltCryptoTalk) to stay up to date with everything crypto-related. Oh and don’t forget to subscribe to the newsletter!
Are you looking to start trading Crypto? Get a 10% trading fee discount when you sign up to ByBit using my link!
Get up to $4150 deposit bonuses when registering using my link and depositing your first funds within 7 days (limited time only)! You’re also getting a 100% MAKER FEE discount for this MONTH ONLY!
Silicon Valley Bank – biggest bank crash Since 2008.
After a week of fighting the crisis, the 16th largest commercial bank in the US, Silicon Valley Bank, was ordered by the US government to close and confiscate its assets. This is the biggest bank crash since 2008.
According to the United States Federal Deposit Insurance Corporation (FDIC) announcement, this unit and the California state government have decided to close Silicon Valley Bank and confiscate assets. The FDIC said it would open the withdrawal gate for insured deposits with a value of less than $250,000 following Monday. Meanwhile, customers with uninsured deposits will receive a certificate of debt and wait until the FDIC liquidates the bank’s assets to receive compensation.
The above information officially marked the collapse of Silicon Valley Bank, the 16th largest commercial bank in the United States, with assets of 209 billion USD. Some major US newspapers even called this the most severe bank failure since the 2008 financial crisis, second only to Washington Mutual bank, which went bankrupt with assets of $ 307 billion.
Silicon Valley Bank earlier this week announced a loss of $21 billion in securities and announced plans to issue an additional $2.25 billion of shares to raise more money. Investors immediately expressed concern at the unexpected developments from the bank, speculating that it might be short of money and deciding to withdraw money. SIVB’s share price continuously dropped by over 60% for three consecutive days, which further caused a delay in the US market.
The concern of crypto investors right now is whether any projects, especially stablecoin issuers, keep money on Silicon Valley Bank.
UK tech industry in turmoil as Silicon Valley Bank UK collapses, emergency cash lifeline.
The collapse of Silicon Valley Bank UK (SVB UK) and its parent company has sent shockwaves throughout the UK tech industry, prompting the government to draw up plans for an emergency cash lifeline to help startups affected by the bank’s collapse.
Chancellor Jeremy Hunt has called the issue a “high priority” and has been holding late-night meetings with the prime minister and the Bank of England governor to avoid further fallout. While there is no systemic risk to the UK financial system, there is a “serious risk” to the technology and life sciences sectors, to which many of SVB UK’s customers belong to.
The government has asked affected startups to disclose their cash on deposit at SVB UK, their monthly burn rate, and whether they have access to other bank accounts. Tech industry representatives have been summoned for an emergency meeting with Treasury officials, and there are hopes that the government will consider either reviving SVB UK through a state bailout or private takeover or offering specialized loans for startups at risk of going bust.
The collapse of Silicon Valley Bank the 16th largest lender in the US has left many businesses at risk of losing almost all their cash, with only £85,000 of clients’ deposits protected by the Financial Services Compensation Scheme.
This has the potential to cripple the UK tech industry, with many businesses at risk of falling into insolvency overnight. Britain’s biggest high street banks have been given a 24-hour deadline to rescue SVB UK from collapse, with lenders including Barclays and Lloyds Banking Group among those to have been approached by the board of SVB UK over the weekend.
Circle’s USDC instability causes a Domino effect on DAI and USDD stablecoins.
The stablecoin ecosystem felt an immediate effect as USD Coin (USDC) depegged from the U.S. dollar due to a subsequent sell-off after Silicon Valley Bank (SVB) did not process $3.3 billion of Circle’s $40 million transfer request. Given USDC’s collateral influence, major stablecoin ecosystems followed suit in de-pegging from the U.S. dollar.
Dai (DAI), a stablecoin issued by MakerDAO, lost 7.4% of its value due to USDC’s de-pegging. As of June 2022, $6.78 billion worth of DAI supply was collateralized by $8.52 billion worth of cryptocurrencies, confirms data from Statista.
Out of the lot, USDC represented 51.87% of DAI’s collateral, worth $4.42 billion. Other prominent cryptocurrencies include Ether (ETH) and Pax Dollar (USDP) at $0.66 billion and $0.61 billion, respectively. As a result, DAI depegged from the dollar to momentarily touch $0.897.
USD Digital (USDD), a stablecoin issued by Tron, and fractional-algorithmic stablecoin Frax (FRAX) shared a similar fate due to adverse market sentiments. USDD responded to the USDC sell-off with a nearly 7.5% drop to trade at $0.925, while FRAX dipped even further to $0.885.
Other popular cryptocurrencies, such as Tether (USDT) and Binance USD (BUSD), continue to maintain a 1:1 peg with the U.S. dollar.
The entire de-pegging ordeal started after Circle announced that $3.3 billion of its funds were not processed for withdrawal by SVB.
Hedera confirms the exploit on Mainnet led to the theft of service tokens.
Hedera, the team behind distributed ledger Hedera Hashgraph, has confirmed a smart contract exploit on the Hedera Mainnet that has led to the theft of several liquidity pool tokens.
Hedera said the attacker targeted liquidity pool tokens on decentralized exchanges (DEXs) that derived their code from Uniswap v2 on Ethereum, which was ported over to use on the Hedera Token Service.
The Hedera team explained that the suspicious activity was detected when the attacker attempted to move the stolen tokens across the Hashport bridge, which consisted of liquidity pool tokens on SaucerSwap, Pangolin, and HeliSwap. However, operators then acted promptly to temporarily pause the bridge. Hedera didn’t confirm the number of tokens that were stolen.
On Feb. 3, Hedera upgraded the network to convert Ethereum Virtual Machine (EVM) compatible smart contract code onto the Hedera Token Service (HTS). Part of this process involved decompiling Ethereum contract bytecode to the HTS, which is where Hedera-based DEX SaucerSwap believes the attack vector came from. However, Hedera didn’t confirm this in its most recent post.
Earlier, Hedera shut down network access by turning off IP proxies on Mar. 9. The team said it has identified the “root cause” of the exploit and is “working on a solution.”
“Once the solution is ready, Hedera Council members will sign transactions to approve the deployment of updated code on mainnet to remove this vulnerability, at which point the mainnet proxies will be turned back on, allowing normal activity to resume,” the team added.
Thailand to offer tax breaks to firms issuing investment tokens.
According to a government spokesperson, the Thai finance ministry will waive corporate income tax and value-added tax for firms that conduct initial coin offerings.
As per the report, companies will have access to alternative ways of raising capital through investment tokens and traditional methods like debentures. The Thai government estimates that there will be about US$3.65 billion of investment token offerings over the next two years, said the spokesperson, adding that the government would lose almost US$1 billion in tax revenue due to the policy change.
Cryptocurrencies have gained popularity in Thailand recently, with the government also relaxing tax rules in crypto trading to promote industry development about a year ago. However, the Thai central bank has taken a more stringent approach to crypto, barring the use of digital assets as a means of payment due to potential threats to the country’s financial stability and the broader economy.
The Thai Securities and Exchange Commission, which has been given a sole mandate to supervise the crypto industry, last year issued new rules prohibiting cryptocurrency companies from offering, lending, and staking products or depository services.
Following the news, sales volumes on Thailand’s largest crypto exchange Bitkub increased 53% over 24 hours to about US$32 million, according to data from CoinGecko.
Biden administration proposes a 30% crypto mining tax, closing wash-trading loopholes.
The administration of U.S. President Joe Biden has proposed an excise tax on cryptocurrency miners equal to 30 percent of the cost of the electricity they use and plans to eliminate tax-deductible losses related to wash-trading of crypto tokens, according to a U.S. Department of the Treasury’s document.
The Treasury Department said any company using computing resources owned or borrowed to mine digital assets will be subject to the 30% tax, which is expected to be introduced over three years in 10% annual stages starting from Dec. 31, 2023. “The increase in energy consumption attributable to the growth of digital asset mining has negative environmental effects and can have environmental justice implications as well as increase energy prices for those that share an electricity grid,” the Treasury Department said.
According to the White House, the estimated global electricity usage for crypto assets is between 120 and 240 billion kilowatt-hours per year, a range that exceeds the annual electricity usage of Australia.
President Biden’s 2024 Fiscal Year budget also included a proposal to apply “wash sale rules” to digital assets to close tax loopholes. Wash trading for tax purposes refers to investors selling a financial instrument for a loss to claim the deductible and then immediately buying it back.
Crypto traders can claim tax-deductible losses on losses and then immediately repurchase tokens as digital assets are not classified as securities, while stocks and bond traders are prohibited from repurchasing the same guarantees for 30 days.
The U.S. expects to apply the same restrictions on crypto from Dec. 31, 2023, where the country might raise US$24 billion from fixing the loophole, according to the White House.
That’s it for now! Thanks for reading today’s newsletter! Be sure to have a look at the Blog section to read our previous editions as well! Have a look at our Guides section if you’re interested in learning more about crypto! And finally, don’t forget to follow us on Twitter!