US senators are demanding answers from crypto companies about their affiliation with the collapsed Silicon Valley Bank (SVB).
In an open letter to 14 of SVB’s biggest clients, Massachusetts senator Elizabeth Warren and New York senator Alexandria Ocasio-Cortez (AOC) inquire about what they see as a “cozy relationship” between the bank and its depositors.
Among the firms addressed in the letter were USDC issuer Circle and crypto lending platform BlockFi. Circle had $3.3 billion of its $40 billion in reserves deposited with SVB, and after the bank’s collapse, USDC experienced a brief de-pegging from the dollar.
Now, Warren and AOC want to know who at Circle, specifically, made the decision to deposit the funds into SVB, plus seven other questions.
They also want to know what the “rationale” was for the decision, and whether or not Circle or its board members ever raised concerns about the company holding such a large quantity of non-FDIC insured assets.
Says the letter,
“According to press reports, your own company revealed that it had $3.3 billion of its crypto reserves at SVB These large balances meant that the vast majority of SVB’s deposits were uninsured by the Federal Deposit Insurance Corporation (FDIC), increasing the threat of systemic contagion if regulators had failed to step in to guarantee all accounts.
Congress, bank regulators, and the public are owed an explanation for the bank’s hyper-reliance on tech industry firms and investors, the extent to which this resulted in an abnormally high percentage of deposits that were not insured by FDIC, and the role that companies like yours might have played in precipitating the $42 billion single-day-run on SVB.12 Obtaining information on these factors is important for understanding how SVB failed and how to prevent the next failure.”
The senators are giving the companies addressed in the letter until April 24 to respond to the questions.
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