The collapse of Silicon Valley Bank (SVB) on March 10, 2023, has sent shockwaves across the tech industry and beyond. SVB was the bank of choice for many startups, venture capitalists, and crypto enthusiasts, who relied on its services and expertise to manage their finances.
Now, with the bank seized by regulators and its deposits frozen, many crypto-related businesses and individuals are facing uncertainty and hardship.
SVB was one of the few banks that offered crypto-friendly accounts and services to its customers. It allowed them to deposit, withdraw, and transfer cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin without any hassle or fees.
It also provided loans and credit cards backed by crypto assets, as well as custody and trading solutions for institutional investors. SVB had partnerships with several crypto exchanges and platforms.
However, after the bank announced that it needed to raise $2.25 billion to shore up its balance sheet due to losses from its long-term Treasury bond portfolio, panic ensued among its customers. Many of them rushed to withdraw their funds from SVB, causing a bank run that drained $42 billion of deposits by the end of March 9.
The next day, the California Department of Financial Protection and Innovation closed down SVB and placed it under the receivership of the Federal Deposit Insurance Corporation (FDIC).
The FDIC announced that it would honor all insured deposits up to $250,000 per account, but about 89 percent of SVB’s $172 billion in deposit liabilities exceeded that limit. The FDIC also said that it would reopen SVB as a bridge bank on March 13 and try to sell all or parts of it to other buyers.
The news came as a shock to many crypto businesses and individuals who had their funds locked up at SVB. Some of them were unable to pay their employees or suppliers , while others faced liquidity problems or margin calls from their lenders or counterparties.
Some also lost access to their crypto wallets or keys that were stored at SVB’s custody service. Many expressed frustration and anger at SVB’s management for putting their money at risk with risky investments. Some also blamed the regulators for not intervening sooner or providing more clarity on how they would handle the situation.
The impact of SVB’s collapse was not limited to its U.S.-based customers. Many international startups and investors who had accounts at SVB’s branches in London, Frankfurt, Shanghai, Hong Kong, Singapore, Tokyo were also affected by the freeze. Some countries’ central banks or financial authorities stepped in to provide emergency liquidity or assistance to their local crypto businesses or individuals who had ties with SVB.
