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Silicon Valley Bank – Last year, the collapse of crypto exchange platform FTX created a domino effect that could be felt across the crypto space.
This year, Silicon Valley Bank has collapsed, which affects both the tech industry and the crypto space.
Following the SVB collapse, several crypto companies have signaled their exposure to the bank, which has upheld a reputation as a prominent lender to tech startups.
What happened?
Silicon Valley Bank was hit with a closure on Friday by the California Department of Financial Protection.
It marked the second-largest bank failure in the United States following the Washington Mutual in 2008.
Last quarter, SVB reported $212 billion in assets.
The bank’s stock started spiraling on Wednesday after rumors emerged that it was seeking an acquisition after it failed to raise sufficient capital to cover its obligations.
In the following days, several venture capital funds advised their clients to withdraw funds.
As a result, $42 billion of withdrawals occurred on Thursday, constituting a run on the bank.
By Friday morning, the Nasdaq froze trading of SIVB shares.
While the bank’s collapse primarily hit venture capital firms and tech startups, crypto companies have disclosed exposures to the bank.
BlockFi
The failed crypto lender filed for bankruptcy in November following the FTX collapse.
According to documents filed on Friday relating to its bankruptcy proceedings, BlockFi has $227 million in funds.
The funds are reportedly uninsured by the Federal Deposit Insurance Commission due to being in a money market mutual fund, which constitutes a violation of bankruptcy law.
BlockFi initially halted withdrawals days after the FTX collapse.
Last June, it was bailed out by the crypto exchange with a revolving $250 million line of credit.
Circle
Circle issues USDC, the world’s second-largest stablecoin.
On Friday, it announced that some undisclosed portion of the cash reserves to back USDC and tie its value to the US dollars were kept in Silicon Valley Bank.
Circle released a statement Friday, saying SVB was among the six banks relied on to manage the USDC cash reserves.
However, they claimed it would be able to continue operating normally.
Stablecoins like USDC are backed by (and pegged to) the value of real-world assets.
They are designed to play a sturdy intermediary between traditional finance and the more volatile crypto markets.
USDC holds a market cap of $42.17 billion, and it is the second-most used stablecoin worldwide.
According to Circle, 25% of assets backing USDC are cash, and they are reportedly fully collateralized.
Last week, Circle separated from collapsed crypto-friendly bank Silvergate, which shut down on Wednesday.
It previously used Silvergate for cash reserves until then.
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Pantera
The crypto-centric venture capital firm might have an amount of exposure to Silicon Valley Bank’s collapse.
According to a February 3 SEC filing, Pantera counted the failed bank among the three custodians of its private funds last month.
It counts as one of the largest crypto-focused VC firms worldwide, raising $1.3 billion in 2022 for a fund that focused on blockchain-based projects.
Avalanche
The Avalanche Foundation, a pillar to the Avalanche blockchain, announced that it has over $1.6 million in exposure to Silicon Valley Bank.
AVAX, its native token, currently holds an incredible market cap of $4.84 billion.
Yuga Labs
The $4 billion company that introduced the Bored Ape Yacht Club NFT collections is exposed to Silicon Valley Bank.
On Friday, co-founder Grego Solano said the company has limited exposure to the bank.
Yuga Labs has yet to confirm how much, but Solano claims the amount doesn’t impact their operations.
Proof
Proof is among the companies that have been hit hard by the closure.
It issued a statement Friday, confirming the company has cash in Silicon Valley Bank.
“Proof holds cash at SVB,” the company tweeted. “We’ve thankfully diversified our assets across ETH, stablecoins, as well as fiat.”
The company has yet to disclose the amount of cash tied with the bank, but conceded that the collapse was a blow.
In addition, it insisted the potential loss wouldn’t affect the security of the customer’s assets or Proof’s roadmap.
Nova Labs
On late Friday, Nova Labs revealed that it was exposed to Silicon Valley Bank.
Amir Haleem, the CEO and co-founder of of Nova Labs, tweeted:
“Nova Labs has some $ stuck in SVB, but the vast majority is in other institutions.”
