According to a Bloomberg report, Circle and Sequoia Capital were among the top 10 depositors at Silicon Valley Bank (SVB) before its collapse in March. Other major depositors included SVB itself, SVB Financial Group, Altos Labs, and China-based Kanzhun. The Federal Deposit Insurance Corporation (FDIC) provided documents indicating that these companies were covered for deposits in the billions of dollars. However, following the collapse of SVB and subsequent bank failures, regulators in the United States are reevaluating their approach to deposit insurance.
The FDIC has been working with the Federal Reserve to make insured and uninsured depositors whole, but in most cases, the FDIC only insures up to $250,000 per depositor. Circle reportedly had around $3.3 billion in deposits at SVB, while Sequoia had approximately $1 billion. These large deposits highlight the risks associated with putting significant amounts of money into a single institution, especially in the volatile world of cryptocurrency.
Following the collapse of SVB, Circle’s stablecoin, USD Coin (USDC), briefly depegged from the US dollar. Circle blamed the decline in USDC market cap on the US government’s crackdown on cryptocurrency. In response, the company announced plans to launch a native version of USDC on the Arbitrum network, a Layer 2 scaling solution for Ethereum.
Overall, this news highlights
the importance of diversifying investments and the potential risks associated with depositing large sums of money in a single institution. It also emphasizes the need for robust regulation and deposit insurance schemes to protect investors in the volatile world of cryptocurrency.