- The funds are not FDIC-insured and is not guaranteed by the bank
- SVB was shut down and taken over by the Federal Deposit Insurance Corporation on Friday
According to a Friday filing, bankrupt crypto lender BlockFi had $227 million in funds held at tech-forward struggling Silicon Valley Bank.
Reportedly the investment is not a Federal Deposit Insurance Corporation (FDIC) insured deposit and is not guaranteed by the bank as they are in a money market mutual fund. A money market mutual fund is a type of fixed-income mutual fund that invests in debt securities characterized by their short maturities, and minimal credit risk.
A balance summary statement provided by the bank for the account states, “money market mutual fund investments are: not a deposit, not FDIC insured, not insured by any federal government agency, not guaranteed by the bank, may lose value.”
BlockFi’s revelations in the filing is concerning as Silicon Valley Bank was shut down and taken over by the Federal Deposit Insurance Corporation on Friday, a move which put nearly $175 billion in customer deposits under the regulator’s control. The bank’s collapse is the second-largest in U.S. history and the largest since the financial crisis of 2008.
Many in the crypto community believe BlockFi’s funds may not be at direct risk despite SVB’s troubles. Certain crypto Twitter users argue that BlockFi’s shares’ value would depend on what’s in the MMF, not what happens to Silicon Valley Bank.
Irrespective of BlockFi not being hugely impacted by its SVB exposure, several other firms in the crypto space can’t say the same.
The USDC issuer Circle had confirmed that $3.3 billion of its $40 billion USDC reserves at Silicon Valley Bank triggered USDC to depeg. In response to the development, Binance, one of the largest cryptocurrency exchanges in the world, announced that they would halt the auto-conversion of USDC to BUSD as Circle’s stablecoin de-pegs.
The Avalanche Foundation, which supports the Avalanche blockchain, also announced that it had “a little over” $1.6 million in exposure to the bank.
Despite many crypto firms coming forward to reveal their exposure to SVB, some firms have decided to alienate themselves from the bank as far as possible. For example, Tether, the firm behind the world’s largest stablecoin, USDT, announced that it had zero exposure to SVB.