Stablecoin issuer Circle and venture capital firm Sequoia Capital were reportedly among the top depositors at the collapsed crypto-friendly Silicon Valley Bank (SVB). According to a report from Bloomberg, the Federal Deposit Insurance Corporation (FDIC) provided documents that suggested Circle, Sequoia, and several others were covered for deposits in the billions of dollars.
Circle reportedly held roughly $3.3 billion in deposits while Sequoia had approximately $1 billion. Other major depositors included Silicon Valley Bank itself, SVB Financial Group, biotechnology research firm Altos Labs, and China-based company Kanzhun Limited.
The failure of SVB and the subsequent collapses of Signature Bank and First Republic Bank have put a spotlight on how regulators in the United States handle deposit insurance. Although the Federal Reserve, FDIC, and Treasury Department said that covering SVB and Signature deposits of more than $250,000 was part of a “systemic risk exception,” they have reportedly explored raising the insurance limit.
Following the failure of SVB in March and Circle confirming it had around $3.3 billion in exposure to the bank, the firm’s USD Coin briefly depegged from the U.S. dollar. In June, the stablecoin issuer announced it planned to launch a native version of USD Coin on the Arbitrum network.
On the other hand, the recent banking collapses have raised concerns about the security of depositor funds and whether current regulations and deposit insurance limits are sufficient to protect investors in the ever-evolving world of cryptocurrencies.
While the FDIC ensures up to $250,000 per depositor, the extraordinary circumstances in the case of SVB’s collapse have highlighted the potential need for an increased coverage limit in the crypto space. As more financial institutions embrace cryptocurrencies and blockchain technology, the pressure on regulators to adapt and ensure the safety of depositor funds will only grow. It remains to be seen how these issues will be addressed in the long term, as the crypto market continues to evolve and expand into new territories.
Source: Cointelegraph
