By James Davis
The demise of Silicon Valley Bank (SVB) will significantly impact the growth of the crypto industry, as it was the bank of choice for over 40% of US venture-backed crypto companies.
SVB ran into liquidity problems following increased withdrawals by its institutional clients. This comes after several media outlets reported that the bank was looking for a buyer. On Thursday alone, SVB clients withdrew a combined $40 billion.
Further, California state banking regulators ordered SVB to halt operations, with Federal Deposit Insurance Corporation (FDIC) appointed as the bank’s receiver. In a press release, FDIC said that SVB customers with $250,000 and below in their accounts could withdraw their funds until Monday while the rest will have to wait.
How SVB’s Collapse is Likely to Affect Crypto Companies
Shipyard CEO Mark Lurie says the SVB collapse makes it difficult for crypto firms to raise funds because most venture capitalists and liquidity providers they rely on have been SVB clients. Lurie suggests that it may take years for SVB customers to get their funds back, so crypto firms should expect reduced venture capital.
But SVB isn’t the only bank that has rattled the crypto industry. On Wednesday, crypto-friendly bank Silvergate announced that it was shutting down, putting an end to its Silvergate Exchange Network. This platform allowed crypto companies to settle large transactions with various institutions.
The Silvergate and SVB failures have given crypto-hating lawmakers like Senator Elizabeth Warren something to talk about. On Friday, Warren took to Twitter to write that these downfalls were disappointing but, at the same time, predictable. The senator warned other banks of the risks that come with crypto exposure.
Meanwhile, Y combinator CEO Garry Tan tweeted on Saturday that there could be a looming problem for crypto companies banking at SVB. He claimed they might be unable to make payroll in the next two months. Tan also stated that SVB’s collapse will set crypto firms and innovation back by ten years or even more.
USDC Issuer Among the Affected Companies by SVB’s Downfall
One of the crypto companies banking with SVB is USDC issuer Circle. According to the Company’s cash reserve attestation released in February, Circle holds in SVB 25% of the reserves backing $44.1 billion worth of circulating tokens. The USDC Issuer, however, says the stablecoin will continue to operate normally.