Silicon Valley Bank and the crypto-friendly – Signature Bank – disclosed operational difficulties and were closed down by regulators.
While some expect the collapse to prompt a domino effect, numerous cryptocurrency-related companies have already suffered losses because of their exposure to the aforementioned institutions. Let’s have a closer look.
As reported last week, Circle – the Boston-based company which issues the second-largest stablecoin USDC – held a whopping $3.3 billion of its cash reserves at Silicon Valley Bank. The news of the bank’s problems caused a severe disruption in USDC’s price, which lost its dollar parity, plunging to as low as $0.87 (CoinGecko data) on March 11.
Despite the issues, Circle stated it continues the normal course of its operations:
“In such case, Circle, as required by law and under stored-value money transmission regulation, will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
USDC stabilized in the following days and is currently hovering around $0.98, which is still a discount to its peg.
Another well-known name part of the burned SVB customers is Ripple. CEO Brad Garlinghouse recently revealed that the company held “some of its cash balance” at the former banking behemoth but expects “no disruption to day-to-day business.” He also assured that Ripple remains in a “strong financial position.”
BlockFi – a crypto lender which experienced major problems throughout 2022 and filed for bankruptcy protection shortly after the FTX crash – had $227 million stuck in SVB. For its part, Avalanche Foundation – a decentralized smart contract platform – reported a little over $1.6 million of exposure to the bank.
The crypto-focused institutional asset manager – Pantera Capital – and the organization behind the popular NFT collection Bored Ape Yacht Club (BAYC) – Yuga Labs – were also affected. The former did not provide details on its exact exposure, while the latter described its liability as “super limited.”
The Chinese journalist Colin Wu hinted that the venture capital firms that have been investing in crypto and Web3 – Andreessen Horowitz (a16z) and Paradigm – could also be part of the SVB contagion.
What About Signature Bank?
The leading US-based cryptocurrency exchange – Coinbase – announced on Twitter that it held $240 million in corporate cash at Signature Bank. As stated by the Federal Deposit Insurance Corporation (FDIC), the venue expects to fully recover these funds.
The blockchain infrastructure platform – Paxos – is next on the list, revealing $250 million exposure to the collapsed bank.
“Seeking private deposit insurance is part of our conservative approach to managing customer assets exceeding FDIC insurance limits,” it added.
However, the company assured that all customer assets are stored remotely, while stablecoin reserves are “fully-backed and redeemable” to clients 1:1 with the greenback at all times.
The bankrupt crypto lender – Celsius Network – also held some of its funds in Signature Bank. The committee of unsecured creditors said all depositors will be “made whole.”
Other prominent industry players, including the cryptocurrency exchange – Crypto.com – and the stablecoin issuer – Tether – were quick to differentiate from the crisis, saying they have no exposure to the failed bank.
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