Title: Circle and BlockFi Under Fire For Banking With SVB
Description: Senators Elizabeth Warren and Alexandria Ocasio-Cortez have sent letters to Circle and BlockFi asking why they chose to bank with SVB despite its ties to crypto-friendliness. We look at how this could affect the relationship between banks and crypto firms.
Circle and BlockFi, two of the leading players in the cryptocurrency industry, are facing questions from Senators Elizabeth Warren and Alexandria Ocasio-Cortez about their banking relationship with SVB. The letters, sent by the senators on April 11, 2021, ask the crypto firms why they chose to bank with SVB despite its affiliation with crypto-friendliness.
The letters, addressed to Circle CEO Jeremy Allaire and BlockFi CEO Zac Prince, questioned the companies’ decision to bank with SVB. The senators noted that SVB had previously received a warning from the Office of the Comptroller of the Currency (OCC) about its crypto-friendly business model. They wrote, “Given the OCC’s concerns, we are concerned that your decision to bank with SVB may pose significant risks to your customers and the integrity of the U.S. banking system.”
The letters went on to state that the senators were concerned that the companies’ banking relationships with SVB could set a dangerous precedent for other banks that might be enticed to enter the crypto space. They wrote, “We are concerned that your decision to bank with SVB could provide a roadmap for other banks, who might be less mindful of the risks associated with crypto-related activities, to follow your lead.”
The letters also noted that the senators were concerned about the lack of transparency surrounding the companies’ banking relationship with SVB. They wrote, “We are also concerned that there is a lack of transparency surrounding your banking relationship with SVB, including the terms and conditions of the banking relationship and the extent to which SVB is exposed to the risks of your customers’ activities.”
The senators have asked for a response to their inquiry by April 26, 2021 and have requested that the companies provide more information about their banking relationship with SVB. They wrote, “We ask that you provide us with a response to our inquiry by April 26, 2021, and include in your response detailed information about your banking relationship with SVB, including the terms and conditions of the banking relationship and the extent to which SVB is exposed to the risks of your customers’ activities.”
The inquiry from the senators is a sign of the increasing scrutiny being placed on the crypto industry by regulators and governments. As the industry continues to grow and expand, it is likely that more questions and concerns will be raised about the risks posed by crypto-related activities. While it is unclear how the inquiry from the senators will affect Circle and BlockFi’s banking relationship with SVB, it is likely that the scrutiny and attention will lead to more transparency and oversight in the banking industry.