Executives from stablecoin issuer Circle and bankrupt cryptocurrency lender BlockFi have been questioned by two members of Congress who are investigating alleged "mutually beneficial arrangements" allegedly with the now-defunct Silicon Valley bank.
On April 9, Sen. Elizabeth Warren (D-) and Rep. Alexandria Ocasio-Cortez (AOC) sent a letter to Circle, BlockFi, and 12 other non-crypto tech companies, asking a series of questions about each company’s relationship with SVB. Lawmakers say more is needed to learn about SVB's reported "coddling" and "white glove" treatment of its largest depositors in order to understand whether the firms played a role in SVB's collapse.
Circle and BlockFi’s respective CEOs, Jeremy Allaire and Zac Prince, were asked about the duration of their financial relationship with SVB and the amount deposited in the bank, and An "agreement" between their companies. Additionally, the pair wondered if SVB offered low-rate mortgages or “perks” such as “ski trips, conferences and lavish dinners” sponsored by SVB.
“Congress, bank regulators, and the public should account for banks’ overreliance on tech companies and investors,” Warren and AOC wrote. They added that the size of SVB's depositors in the tech sector resulted in an "incredibly high percentage of deposits" not insured by the FDIC, and questioned executives' role in facilitating $42 billion in single deposits. Possible role" - runs on SVB. "
"Acquiring information about these factors is important to understand why SVB failed and how to prevent the next failure," they added. Warren and AOC say they believe this explains why some customers, such as Circle, keep large uninsured deposits with SVB. Shortly after SVB collapsed, Circle revealed that it had $3.3 billion in funds frozen at SVB, while BlockFi was found to have $227 million in uninsured deposits at the bank.
