During the weekend, there were concerns raised about Silicon Valley-based blockchain payment companies regarding their potential connections to the collapsed bank.
Brad Garlinghouse, the CEO of Ripple, verified that the company has funds connected to the bankrupt Silicon Valley Bank, but he did not provide any additional information. This was reported in a Twitter thread on Sunday.
“Setting the record straight on SVB Qs: Ripple had some exposure to SVB.”
Furthermore, he reassured the public and Ripple’s clients that its ties to the failed Silicon Valley Bank would not affect the company’s operations. He explained that Ripple had a wide range of banking partners and had kept cash reserves with them, diversifying its exposure and reducing its dependence on any single bank.
The Ripple chief highlighted that the collapse of Silicon Valley Bank exposed the weaknesses of the traditional financial system. He noted that rumors could trigger bank runs, leading to a bank’s collapse. He also pointed out that banks cannot process wire transfers continuously, and the process of moving money is still challenging.
It was reported that David Schwartz, the Chief Technology Officer of Ripple, had stated that the company would release an official statement on the matter.
Depositors Granted Access to Funds
Following Ripple’s announcement, the Federal Deposit Insurance Corporation (FDIC) stated that it would provide coverage for all deposits in Silicon Valley Bank, regardless of whether or not they are insured.
According to a recent report from Bloomberg, depositors will be able to access their funds from Monday, March 13th, despite the collapse of Silicon Valley Bank. The FDIC can achieve this by using a “systemic-risk exception” rule that enables the Fed to issue direct loans.
Initially, the FDIC’s plan was to compensate insured depositors and issue advanced dividends to uninsured depositors of Silicon Valley Bank. However, a previous report revealed that over 93% of the bank’s customers were uninsured, making this plan unfeasible.
Consequently, regulators provided a backstop for deposits to avoid a potential spillover effect and the collapse of several American tech startups that held accounts with SVB. Additionally, the short time frame for due diligence made it difficult to find a buyer for the bank during the weekend.
Read also: Ripple CEO Criticizes SEC on Recent Court Rulings
Earlier reports revealed that Silicon Valley Bank experienced a bank run last week, which prompted regulators to intervene on Friday. The bank run was triggered by the bank’s announcement of plans to sell a significant number of shares to raise capital after incurring losses on previously held securities due to Federal Reserve rate hikes. Since most of the customers’ deposits were invested in long-term securities, the bank lacked the liquidity to meet the withdrawal requests surge.
As the FDIC processes withdrawals for depositors, it is expected to initiate another auction within the week to search for potential buyers for Silicon Valley Bank. Previous reports stated that Elon Musk had expressed interest in acquiring the failed bank.