Welcome to another Crypto Weekly Digest brought to you by VirtualBacon
In this week's issue:
- Circle USDC depeg explained
- Prominent Crypto VCs Had Over $5 Billion Assets in Failed SVB Tech Bank
- Feds also shut down Signature Bank but promise depositors will be made whole
- Federal Reserve Establishes $25 Billion Bank Term Funding Program
- Binance CEO CZ Plans to Convert $1B Recovery Funds from BUSD to Native Crypto
- OKX Exchange pausing dollar deposits after partner Signature bank shut down
- The best time to dive into ZK projects is now
- Old giant with new wings - another zkRollup contender rises: Aztec Network
Circle USDC depeg explained
Recently, there has been news of Silicon Valley Bank (SVB) terminating its banking relationship with Circle, the operator of the USDC stablecoin. As a result, there are concerns about the stability of USDC, and its potential to depeg from the US dollar.
However, experts have analyzed the situation and believe that the impact of the SVB collapse on Circle's reserves is not life-threatening. The total amount of cash stored at SCB was $3.3 billion, while the reserve backing the USDC stablecoin is around $40 billion.
It is believed that Circle may lose a maximum of 6% of their funds, which is around $200 million. Circle's reserve holdings are highly reassuring, with 23% in cash and 77% held in one to four month U.S treasury bills, making them highly liquid assets.
There is also a possibility of a fundraise or Circle taking a debt or credit facility from institutional lenders.
It is advised to not send USDC to Circle for redemption into US dollars due to gated retention or withdrawals. If you are holding USDC and not convinced it will return to its peg, you can trade it for USDT in the short term.
Since the Feds action on Sunday making SVB depositors whole, Circle USDC has announced that the $3.3 Billion reserve risk has been removed. Kudos to them for a quick 2 day emergency response to prevent a bank run situation.
Prominent Crypto VCs Had Over $5 Billion Assets in Failed SVB Tech Bank
A report revealed that prominent venture capitalists active in blockchain and emerging technologies held over $6 billion worth of assets in Silicon Valley Bank (SVB), which recently collapsed.
The report includes Andreessen Horowitz ($2.85B), Paradigm ($1.72B), and Pantera Capital ($560M), who currently have investments in projects such as Alchemy, Sky Mavis, and Uniswap.
However, the figures in the report only reflect a point-time disclosure from the firms' U.S. Securities and Exchange Commission filings and do not include recent transactions.
Feds also shut down Signature Bank but promise depositors will be made whole
Signature Bank, another crypto-friendly bank, has been seized by the New York Department of Financial Services (NYDFS) to protect depositors.
This happened soon after California regulators seized Silicon Valley Bank following a run on deposits. US Federal Reserve Chairman Jerome Powell, US Treasury Secretary Janet Yellen, and Federal Deposit Insurance Corporation Chairman Martin Gruenberg delivered a joint statement addressing the crisis.
They stated that while the government will not bail out the banks, all depositors of both banks will be made whole and have access to their funds starting Monday. This means that shareholders will likely be wiped out and creditors will receive what's left after paying depositors.
Federal Reserve Establishes $25 Billion Bank Term Funding Program
The U.S. Federal Reserve has launched the Bank Term Funding Program (BTFP), a $25 billion funding initiative designed to provide liquidity to banks, savings associations, credit unions, and other eligible depository institutions.
The program will offer loans of up to one year to eligible firms, who must pledge U.S. Treasuries and other assets valued “at par” as collateral. The goal of the program is to avoid further banking liquidity issues following recent bank collapses, and it will serve as an “additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.”
Binance CEO CZ Plans to Convert $1B Recovery Funds from BUSD to Native Crypto
Binance CEO Changpeng Zhao has announced that Binance will convert its Recovery Funds from BUSD stablecoin to native cryptocurrency. The Recovery Funds were set up by Binance in 2018 to reimburse users in the event of a security breach.
The move to convert to native cryptocurrency is aimed at increasing transparency and ensuring that users have direct control over their own funds. BUSD will still be accepted as a form of payment on the platform. The announcement comes as Binance continues to face regulatory challenges in several countries.
OKX Exchange pausing dollar deposits after partner Signature bank shut down
OKCoin has reportedly paused USD deposits after its partnership with Silvergate Bank was terminated. According to sources, the termination of the partnership was initiated by Silvergate Bank and resulted from a "risk review."
Now with Signature bank also shut down, OKX seems to be under fire as Signature is their primary USD bank for customer transactions. While OKCoin has not provided an official statement, it is expected that the company will be able to find another banking partner to process USD deposits soon.
The best time to dive into ZK projects is now
Now is the opportune time to explore ZK projects as the launch of two significant networks is on the horizon.
Polygon's zkEVM is set to launch on March 27th, while zkSync Era is expected to launch by the end of March and is welcoming 200 projects to its mainnet. Both of these networks are full zkEVMs and are the first zk-rollups to launch with complete EVM compatibility.
Additionally, Scroll has just announced a new funding round with $50M raised at a $1.3B valuation, making it the third leading zkEVM.
With the launch of these networks and the potential for an Airdrop with zkSync, expect ZK to be a highly discussed topic throughout March and April.
Check out our tutorial on how to qualify for the zkSync airdrop - the window is closing as the token will likely come out in March or April.
Old giant with new wings - another zkRollup contender rises: Aztec Network
Aztec Protocol is one of the oldest zk focused Ethereum addon solutions since 2019. Although their initial usecase of zk focused around privacy called Aztec Connect, but less so about a zkRollup scaling solution.
This could pose an adoption issue in the short term as privacy is under heavy regulation and exchanges don't want to touch cryptos in this sector, even though the underlying ZK technology can be groundbreaking.
Luckily, this week Aztec made a pivotal announcement to sunset its privacy infrastructure and tools for Ethereum called Aztec Connect, which aimed to extend privacy functionality on Ethereum beyond simple payments and toward arbitrary smart contract interactions.
The team now plans to focus on developing two major products: Noir, a universal language of zero knowledge, and the next-generation encrypted zkRollup. The team claims Noir is the simplest and most powerful way to write programs in zero-knowledge, capable of using multiple proving backends and verifying to any EVM chain. The full set of specifications for the new zkRollup is expected to be released in the first half of 2023.
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