Silicon Valley Bank Collapse: Circle, Sequoia Among Top Depositors

• Silicon Valley Bank (SVB) collapsed in March with Circle and Sequoia Capital among its top 10 depositors.
• Other major depositors included SVB Financial Group, Altos Labs and Kanzhun.
• The Federal Reserve, FDIC and Treasury Department have made moves to insure both insured and uninsured depositors following the collapse.

Silicon Valley Bank Collapse

The collapse of cryptocurrency-friendly Silicon Valley Bank (SVB) in March has put a spotlight on how regulators in the United States handle deposit insurance. Stablecoin issuer Circle and venture capital firm Sequoia Capital were reportedly among the top 10 depositors at SVB when it failed, each holding deposits in the billions of dollars.

Depositors Covered

The Federal Reserve announced that it would work with the Federal Deposit Insurance Corporation (FDIC) to make both insured and uninsured depositors whole — in most situations, the FDIC only insures up to $250,000 per depositor. Other major depositors included SVB Financial Group, biotechnology research company Altos Labs and China-based firm Kanzhun Limited.

USDC Depegged

Following the failure of SVB and Circle’s exposure of roughly $3.3 billion to the bank, USD Coin (USDC) briefly depegged from the U.S. dollar. In June, Circle announced plans for a native version of USDC on Arbitrum network.

Regulators Reacting

Though regulators like the Fed, FDIC and Treasury Department said covering SVB deposits of more than $250,000 was part of a “systemic risk exception” they have reportedly explored raising this insurance limit further.

Unstablecoins Risks

The collapses at Silicon Valley Bank, Signature Bank and First Republic Bank has highlighted potential risks posed by unstablecoins such as USDC which can be easily moved between different banks or jurisdictions depending on risk factors or regulations applied by authorities.