SBF + SVG + SVB + USDC + DAI + SBNY = Slippery Slope?
On Friday it was Silicon Valley Bank and on Monday morning, Signature Bank, a very crypto friendly bank, closed its doors to customers.
Welcome to another edition of The Scoop. The Scoop is that feeling of relief you get when you realize the fact that you didn’t act on FOMO two months ago is looking like a smart move right now. Phew!!
The Big Scoop
If you didn’t know what the big Scoop was going to be this week, you’ve been living under a rock.
First it was Silvergate Financial. On Friday it was Silicon Valley Bank and on Monday morning, Signature Bank, a very crypto friendly bank, closed its doors to customers. All three institutions are getting crushed by interest rates and bank runs, forcing United States President Joe Biden to speak on Monday and reassure the public that federal insurance premiums will help startup CEOs at SVB, and customers in general get their money out safely without having to depend on taxpayers.
Both the crypto market and the broader financial market liked that news with prices shooting up across the board because it means there won’t be a government bailout just yet. That being said, us crypto enthusiasts got quite a wake-up call over the weekend because the sudden bank run on Silicon Valley Bank caused stablecoins USDC and DAI to de-peg. USDC briefly fell below $0.90 and DAI ended up in similar territory. DAI is partially backed by Circle, the company that founded USDC, so you should know there’s a bit of contagion there.
With all this going on, the question is, is there any good news?
That depends on how you look at it. If you just want to see number go up, it is actually good news believe it or not. The more trouble banks get into because of rate hikes, the less likely it is that the United States government continues to raise rates, at least in the short term.
As soon as the government pauses rate hikes, both stocks and crypto will skyrocket in price. A pause means inflation will continue to go up, and if you’ve been paying attention to the price of precious metals early in the week, you’ll notice crypto is starting to move with them. Bitcoin and Ethereum are up 18% and 15% respectively at the time of this writing on Monday.
Is this the beginning of crypto and Web3 finally decoupling from the traditional financial system?
Time will tell... although, the 25% increase in BTC may be a give away :)
On another note, a certain writer of The Scoop doesn’t want you to think that the world of Web3 is totally dark. Adoption is going to increase, eventually. That’s because not only is the building continuing, but the customer experience with regard to how we use crypto wallets is about to change. That’s all thanks to a recent announcement at Wallet Con in Denver.
With so much going on, we should probably cover the good, the bad, and the ugly in the news this week….
HSBC Buys Silicon Valley Bank for a Single British Pound
Global banking giant HSBC is coming to rescue the United Kingdom-based branch of the collapsed Silicon Valley Bank with a new acquisition.
HSBC officially announced on March 13 that its subsidiary, HSBC UK Bank, is acquiring Silicon Valley Bank UK (SVB UK) for 1 British pound ($1.21).
As of March 10, 2023, SVB UK had loans of around 5.5 billion pounds ($6.7 billion) and deposits of around 6.7 billion pounds ($8.1 billion), HSBC said in the announcement.
For the financial year ending Dec. 31, 2022, SVB UK recorded a profit before tax of 88 million pounds ($107 million). SVB UK’s tangible equity is expected to be around 1.4 billion pounds ($1.7 billion).
“Final calculation of the gain arising from the acquisition will be provided in due course,” HSBC wrote, adding that the assets and liabilities of the parent companies of SVB UK are excluded from the transaction. The company added that the acquisition would be funded from existing resources and would be completed immediately.
According to HSBC Group CEO Noel Quinn, the acquisition makes “excellent strategic sense” for HSBC’s business in the United Kingdom, strengthens its commercial banking franchise, and enhances its ability to serve innovative and fast-growing firms.
“We welcome SVB UK’s customers to HSBC and look forward to helping them grow in the UK and around the world,” Quinn said, adding:
“SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC.”
The news comes after authorities in the United States ordered SVB to shut down operations on March 10, triggering panic in crypto markets because some major crypto companies like Circle and Coinbase had significant exposure to the bank.
ERC-4337 is Going to Make Using an Ethereum Wallet Easier for Your Grandma
The new ERC-4337 standard has enabled the creation of smart accounts on Ethereum, which are expected to make cryptocurrency more user-friendly and increase mainstream adoption. Yoav Weiss, a security researcher for the Ethereum Foundation, announced at WalletCon in Denver that the core contracts for ERC-4337 have passed an audit by Open Zeppelin and will be available on every Ethereum Virtual Machine (EVM) compatible network, including Polygon, Optimism, Arbitrum, BNB Smart Chain, Avalanche, and Gnosis Chain. With the new smart accounts, new users will no longer need to learn about complicated seed phrases or the technical process of setting up a wallet to onboard into the decentralized world of crypto. Weiss explained that this will make it easier for the next billion users to enter the cryptocurrency market.
The account abstraction feature of ERC-4337 enables the unique cryptographic keys used for cryptocurrency to be stored on standard smartphone security modules, essentially turning them into hardware wallets. This feature also allows for two-factor authentication, setting monthly spending limits, and session keys to play blockchain games without constantly having to approve transactions. In the event that a user loses their phone or device, they can use time-locked social recovery of their account via a group of trusted friends or a commercial service.
The ERC-4337 standard has been in development for two years, with the team funded via grants from the Ethereum Foundation. Although similar functionality is available on smart contract wallets from Argent and Gnosis, these solutions require centralized components called relays to pay gas fees. ERC-4337 decentralizes the entire system, enabling account abstraction without requiring a difficult hard fork of Ethereum.
Bundlers, which are like miners or validators, take user operations from the mempool and deliver the desired result back to the wallet. Bundlers also pay for the gas required and are compensated by the user's contract account or by a third party known as a "paymaster." This could be a decentralized application (DApp) or it could be a wallet provider. The first production-grade bundler to be deployed on mainnet is from Stackup, but more will be available soon.
Account abstraction is shaping up as a key theme for crypto in 2023, and the technology has already been incorporated natively into zk-Rollup layer 2 solutions from StarkWare and zkSync. Visa has also designed an automated crypto bill payment system that makes use of it. The use of smart accounts is expected to increase the adoption of cryptocurrency by making it more user-friendly and accessible to the general public.
Long story short… you’re still-new-to-smartphones Grandma is going to have an ETH wallet someday (and if she doesn’t, you’re not pushing Web3 adoption enough😝)
If the extra-long big scoop didn’t do it for ya, perhaps this chart says it all. What a difference a year has made in the life and times of Silvergate.
Fundraising In Web3.
Here’s the skinny on the money being raised to keep Web3 building over the last week or so🧀💲🤑💸💰
Did you know that the Bitcoin network can host NFTs now? If not, you need to do some studying. Not to worry, the Scoop is here to save the day. Check this out👇
For this week's applied learning we have provided a video from Tech Express on how to buy NFTs in 2023 using Open Sea!
Here’s a meme that says exactly what we all feel whether the market is up or down.
The Final Scoop
The news of several banks collapsing over the weekend isn’t good for macroeconomics, but it might trigger a huge bull market in crypto. Many investing pundits across mainstream media are pointing out that there is almost no way the American federal government can proceed with another rate hike of 50 basis points over the next week or two just because it would crush the traditional financial system. As soon a the government takes its foot off the rate-hike gas pedal, crypto will shoot to the moon.
How long it will last is anybody’s guess. Either way, it’s time to keep building, and it’s time to consider what we’re doing in Web3 as the real life alternative to having to deal with massive governments and banks making big decisions that impact us all negatively.
Remember. Web3 is still in your hands no matter what’s going on in the external environment. Just take things one step at a time.
Share The Scoop
No matter how bad it gets out there, we are committed to continuing to grow The Scoop, Cirus, and the broader Web3 community. We invite you to join us for the ride and Share The Scoop with your friends and family.
Thank you so much for HODLing on with us!
See you next week!