Silvergate, Signature, and Silicon Valley Bank were three of the most likely banks for crypto businesses to obtain fiat banking services in the USA. However, all three banks have closed within a week due to a classic bank run, reminiscent of the financial crisis in 2008. As a result, numerous crypto companies have been impacted by this collapse. Here is a brief overview of the affected businesses.
Brad Garlinghouse, the CEO of Ripple, has acknowledged the company’s association with Silicon Valley Bank. In a Twitter post, Garlinghouse confirmed that SVB was one of their banking partners and that an undisclosed sum of money was deposited with the bank. However, he also assured that there would be no interruption to their regular operations as they had already spread the majority of their USD holdings across a wider network of banking partners.
Circle, the issuer of USDC, declared on March 11, 2023 that 77% ($32.4B) of USDC was backed by US Treasury Bills with a maturation period of three months or less. Silicon Valley Bank was one of the six banking partners Circle used to handle the remaining 23% ($9.7B) of USDC reserves held in cash. Of the 23% ($9.7bn) held in cash, $5.4bn had already been deposited with BNY Mellon, while $3.3bn of USDC’s cash reserves were still with SVB.
On March 12, 2023, Circle’s Co-founder & CEO, Jeremy Allaire, stated that the risk related to the $3.3B USDC reserve deposit held at Silicon Valley Bank had been eliminated, which accounts for approximately 8% of the total USDC reserve. This was due to the implementation of new automated settlement processes in partnership with Cross River Bank. It was also confirmed that no USDC cash reserves were kept at Signature Bank.
Paxos, a stablecoin issuer, announced via their official Twitter account (@PaxosGlobal) on March 9 and 10 that they had minimal exposure to Silvergate and confirmed that their stablecoins had no connection to the failure of Silicon Valley Bank.
On March 13, the New York-based crypto company disclosed that they held $250 million at Signature Bank, but also mentioned that they have private insurance that covers any amount not protected by the standard FDIC insurance of $250,000 per depositor. Paxos highlighted that they have over 90% of their stablecoin reserves invested in short-term US Treasury bills and overnight repurchase agreements, ensuring that all Paxos stablecoin reserves are fully collateralized and redeemable to customers at a 1:1 ratio with the US dollar at all times.
Coinbase, the American cryptocurrency exchange platform, revealed that as of the close of business on Friday, March 10, it had a balance of approximately $240 million in corporate cash at Signature Bank. Additionally, Coinbase assured that all client cash held at banks is safeguarded by FDIC pass-through insurance, which they anticipated would be completely recoverable.
According to Ava Labs Founder and CEO Emin Gün Sirer, he is thankful for the cautious treasury strategy implemented by the Avalanche Foundation. The Avalanche blockchain has recently confirmed that the foundation has no connection to Silvergate and has only a minimal exposure of slightly more than $1.6 million to Silicon Valley Bank.
Paolo Ardoino, the Chief Technology Officer of Tether, a stablecoin backed by assets, has confirmed that the company has no exposure to either Signature bank or SVB.
According to Jesse Powell, the CEO and Co-founder of Kraken, a San Francisco-based cryptocurrency exchange, the company has confirmed that they do not have any connection or exposure to Silicon Valley Bank.
Prominent figures in the cryptocurrency industry have expressed their views in the aftermath of the collapse of major banking institutions. CZ, the CEO of Binance, suggested on Saturday that there may be a coordinated attempt to close down banks that are supportive of cryptocurrency. Meanwhile, Meltem Demirors, the Chief Strategy Officer of CoinShares investment firm, expressed her surprise at how quickly the economic situation had deteriorated.
Ryan Selkis, the CEO and founder of Messari Crypto, stated in a recent tweet that within a week, crypto’s banking infrastructure has been shut down. He further added that the next target could be USDC and the message from Washington DC is clear that crypto is unwelcome.
A recent update indicates that the Treasury, Federal Reserve, and FDIC have made a prudent decision to guarantee full reimbursement to ALL depositors at Silicon Valley Bank and Signature Bank. The key takeaways from the press release include the following: there will be NO bailout, senior management will be removed, shareholders and unsecured debtholders will not receive protection, taxpayers will not suffer any losses, and eligible depository institutions will receive additional funding.