Three crypto venture capital firms, Paradigm, Pantera Capital, and Andreessen Horowitz (a16z), may have more than $5 billion tied up in Silicon Valley Bank (SVB).
Venture crypto funds used Silicon Valley Bank
The funds were reportedly held in custody by SVB, which was close and the Federal Deposit Insurance Corporation (FDIC) appointed as receiver by the California Department of Financial Protection and Innovation on March 10.
Unconfirmed data, stripped from the United States Securities and Exchange Commission (SEC) ADV file data for five years, shows that as of May 6, 2022, a16z-related funds held $2.85b in SVB. Meanwhile, as recently as this year, funds from Paradigm and Pantera Capital have more than $2.5 billion locked up at the technology lender.
Although the report was automatically removed from SEC filings for five years, it does not include recent updates, such as deposits or transfers made after disclosure. It only provides a snapshot of the VC’s assets in SVB custody at any given time.
Furthermore, the discarded data does not show the amount of funds held by previous crypto funds when the California regulator placed SVB under FDIC receivership. Also, from the batch above, it is also unclear how much of the assets of Paradigm, Pantera, and a16z, currently held by SVB, were allocated to cryptocurrency investments.
After the loss, a crisis of confidence ensued, leading to ransom demands of tens of billions of dollars in a couple of days at SVB-exposed companies. This has raised concerns about the safety of assets held by crypto companies at traditional financial institutions. It doesn’t help that the issuer of USDC, a stablecoin that tracks the USD, Circle, currently has $3.3 billion in deposits stuck at the lender and is struggling to maintain the $1 peg.
Evolution of crypto regulation
The crypto industry has been largely unregulated for years, but it is evolving. Subsequently, many investors and companies opt for financial institutions such as Silicon Valley Bank and Silvergate Bank, platforms willing to carry out their cash transfers and provide liquidity.
It is not yet clear how the collapse of SVB will affect the cryptocurrency industry in the long term. However, investors are likely to start looking for more secure ways to store their assets, such as through decentralized finance (DeFi) platforms or gain exposure to crypto-focused financial institutions that offer greater security and protection for their assets.
