It is unclear how much assets custodied on behalf of crypto VCs are stuck in Silicon Valley Bank.
According to a report that began circulating on March 11 in the aftermath of the collapse of Silicon Valley Bank (SVB), at one point in time, the firm custodied over $5 billion worth of assets held by prominent blockchain venture capitalists. These include $2.85 billion from Andreessen Horowitz (a16z), $1.72 billion from Paradigm and $560 million from Pantera Capital. Matt Huang, co-founder Paradigm, has since clarified on Mar. 11 that Paradigm currently holds no balance on SVB.
A16z currently holds active investments in projects such as Alchemy, Sky Mavis and Yuga Labs, and was previously an investor in cryptocurrency exchange Coinbase. Paradigm has invested in projects such as Compound, Cosmos and Uniswap. Meanwhile, Pantera Capital holds stakes in projects such as 1inch, Ankr and Zcash.
The report, compiled by Castle Hall due diligence and extracted from United States Securities and Exchange Commission filings, is a point-time disclosure of the VCs’ assets held in custody by SVB. It does not include updates such as recent withdrawals, deposits or transfers after the time of disclosure. In addition, while the said firms are prominent investors in the crypto space, not all its assets held by SVB are used in crypto investments.
SVB, a significant financial lender servicing venture capital firms and tech companies, was shut down by California regulators on March 10. At the time, it was the 16th largest bank in the U.S., with over $212 billion in assets. The cause of the collapse was, apparently, a failed leveraged bet on U.S. treasury bonds that led to $1.8 billion in losses on its $21 billion portfolio after the U.S. Federal Reserve repeatedly raised interest rates this past year — sharply driving down the prices of bonds.
Despite the relatively small loss, a crisis of confidence ensued, leading to tens of billions of dollars of redemption demands in a couple of days. The company reportedly has $74 billion left of longer-term U.S. Treasurys, which it has yet to liquidate to meet redemptions. Circle, the issuer of the popular USD Coin (USDC) stablecoin, currently has $3.3 billion worth of deposits stuck in SVB.
SVB Crash Explained
— Ming Zhao (@FabiusMercurius) March 10, 2023
Silicon Valley Bank—#16 largest US bank with $212B — just crashed 60% in 1 day & fell 22% post-close. Stock halted now.@BillAckman is calling a US gov bailout.@peterthiel is calling a bank run.
JPM, BAC, WFC all dropped 6%.
What's next?
Is this… https://t.co/xT4t5hLiwI pic.twitter.com/GEbvAdT8SQ
Update Mar. 13 2023 02:00 AM UTC: Added clarification on Paradigm currently holding no assets on SVB.
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