Executives at Circle, a stablecoin issuer, and BlockFi, have been questioned by two members of Congress investigating (SVB)
The alleged “mutual backscratching arrangements” with the now-failed Silicon Valley Bank (SVB). The lawmakers accused SVB of “coddling” and giving “white glove” treatment to its largest depositors, and more information was sought about SVB’s relationship with the firms to understand their role in its collapse.
On April 9, Senators Elizabeth Warren and Alexandria Ocasio-Cortez sent letters to Circle, BlockFi, and 12 other non-crypto tech firms, asking a series of questions on each firm’s relationship with SVB.
The lawmakers stated that it was necessary to understand if these firms played a role in SVB’s collapse by offering perks such as low-interest rate mortgages or sponsored “ski trips, conferences, and fancy dinners” and wanted to know the length of the financial relationships, amounts deposited, and what “agreements” were made between their firms.
Jeremy Allaire and Zac Prince, the respective chief executives of Circle and BlockFi, were questioned, along with other executives, on the role that companies like theirs might have played in precipitating the $42 billion single-day-run on SVB.
They were asked about their financial relationships with SVB, the extent of SVB’s depositors in the tech industry, and their role in it. The lawmakers believe it may explain why some customers, such as Circle, placed extremely large amounts of uninsured deposits at SVB.
SVB collapsed, and shortly after, Circle disclosed that they had $3.3 billion tied up at SVB, while BlockFi was found to have $227 million in uninsured deposits with the bank.
SVB had a hyper-reliance on tech industry firms and investors, and the lawmakers believe Congress, bank regulators, and the public are owed an explanation for its collapse. They said that obtaining information on these factors is important for understanding how SVB failed and how to prevent the next failure.
It is unclear what information Circle and BlockFi provided to the lawmakers or whether they will face any repercussions. However, the letters indicate that regulators and lawmakers are keeping a close eye on the cryptocurrency industry, and companies operating in it should expect more scrutiny in the future.
Circle, Blockfi and SVB
In conclusion, the letters sent by Senators Warren and Ocasio-Cortez to Circle, BlockFi, and other non-crypto tech firms show that regulators and lawmakers are closely monitoring the cryptocurrency industry.
The executives of Circle and BlockFi were questioned on their relationship with Silicon Valley Bank and the role their firms may have played in its collapse. The lawmakers believe that understanding the factors that led to SVB’s failure is crucial for preventing future failures.
While it is unclear what information was provided to the lawmakers or whether there will be any repercussions, it is clear that the cryptocurrency industry should expect more scrutiny in the future