Three crypto venture capital firms, Paradigm, Pantera Capital, and Andreessen Horowitz (a16z), may have over $5b tied up in Silicon Valley Bank (SVB).
Crypto venture funds used Silicon Valley Bank
Funds were reportedly held in custody by SVB, which was shut down and the Federal Deposit Insurance Corporation (FDIC) assigned as a receiver by the California Department of Financial Protection and Innovation on Mar. 10.
Unconfirmed data, scrapped from the United States Securities and Exchange Commission (SEC) ADV file data over five years, shows that as of May 6, 2022, a16z related funds had $2.85b in SVB. Meanwhile, as recently as this year, Paradigm and Pantera Capital funds have over $2.5b locked up in the technology lender.
Although the report was auto-scraped from SEC filings over five years, it does not include recent updates, such as deposits or transfers made after disclosure. It only provides a snapshot of the VCs’ assets held in custody by SVB at a particular time.
Moreover, scrapped data doesn’t show the amount of funds held by the above crypto funds when the California regulator placed SVB under FDIC receivership. Moreover, from the above batch, It is also unclear how much of Paradigm, Pantera, and a16z’s assets, currently held by SVB, were allocated for crypto investments.
Following the loss, a crisis of confidence ensued, leading to tens of billions of dollars of redemption demands in a couple of days in SVB-exposed firms. This has led to concerns about the safety of assets held by crypto firms in traditional financial institutions. It doesn’t help that the issuer of USDC, a stablecoin tracking the USD, Circle, currently has $3.3b worth of deposits stuck in the lender and is struggling to maintain the $1 peg.
Crypto regulation evolving
The crypto industry has been largely unregulated for years, but it’s evolving. Subsequently, many investors and businesses opt for financial institutions like Silicon Valley Bank and Silvergate Bank, platforms willing to effect their cash transfers and provide liquidity.
It is not yet clear how the collapse of SVB will impact the crypto industry in the long term. However, investors will likely start looking for more secure ways to store their assets, such as through decentralized finance (DeFi) platforms or get exposure to crypto-focused financial institutions offering greater security and protection for their assets.