Silvergate, SVB bank failure created ‘a big problem’ for crypto: Investor
Kavita Gupta, Delta Blockchain Fund General Partner, joins Yahoo Finance to talk about the collapses of Silicon Valley Bank and Silvergate, what they mean for the crypto market, and what’s next for the banks’ clients.
Video transcription
DAVE BRIGGS: The collapse of Silicon Valley Bank has sent many startups and their investors into pandemonium in recent days. While the federal government has said all customers will get their deposits returned, there are still concerns about what happens to early-stage companies that banked with SVB. Joining us now is Kavita Gupta, Delta Blockchain Fund’s General Partner. Kavita, nice to see you. You have some investments linked to some SVB customers. What are you hearing from them and just your reaction to everything that continues to unfold over the last couple of days?
KAVITA GUPTA: First of all, thank you so much for having me. It’s been crazy. It’s like one of the most unexpected news you hear, right? Because you think about bank failures, I mean, I’ve seen 2008, 2009, and now a bank, which is actually long US bonds and Treasuries and because of the rise in interest rates, is now closing down and has closed down a lot of technological innovation is something completely unexpected.
What we’ve seen is over the weekend, most of the companies, especially the Series A, Series B, and like even earlier companies with Silicon Valley Bank, have gone out to think about whether they’re going to take a salary? Are they actually, whatever rise they had in the bull market, will they be able to sustain it, or will they just have to shut down?
Now, thank God, they are going to get their money back. But the problem doesn’t stop there. The problem is, where are they taking their banking platforms? Because it seems like a ripple effect, as we’ve seen, across other regional banks, so you’re left with the top four banks. So to get your KYC, even if you get money, which bank account do you take? And then connecting it to Myspace, which is blockchain and crypto, where most of the bigger banks don’t even do KYC, aren’t very friendly towards, is still stuck. Where do they go?
SEANA SMITH: So where do they go? What happens to these companies? And you talk about how complicated this is at this point. Is this something – I guess, how long do you potentially see these issues persisting?
KAVITA GUPTA: Seana, it’s been a little split – it’s been crazy because a lot of these companies thought that they can go to USDC or have a stablecoins account. And we saw for the first time that USDC, which is the most reliable stablecoin in the space, depegged all the way to 0.9, 0.91. And so that creates a big problem for the blockchain crypto community about where they take their money.
A lot of founders that are outside the US have– are from outside the US have some connections, they literally move out and do the KYCs from Portugal to Dubai to Singapore. We are seeing a large exodus of moving money back into stablecoin and then back outside the US. But there is no clear path. There is no rule of thumb anymore. It’s just like what you can figure out and do. So for the blockchain crypto community, actually the three biggest friendly – crypto friendly banks, Silvergate, Signature, SVB, all three have disappeared. So aside from Cross River, there doesn’t seem to be any options out there.
DAVE BRIGGS: What do you think of the sudden increase, given everything you just posted, of Bitcoin today up more than 9%? How do you understand that?
KAVITA GUPTA: It’s just because going back to having a trust in something that isn’t controlled by government and regulations isn’t affected by it, you know? And that’s where the crypto community, even during the COVID era when everybody was just printing money and inflation was increasing, we saw a surge, a big summer for crypto. And I feel it is exactly the same. It’s now that prices are going up for Bitcoin, for Ether, because even stablecoins, as we saw over the weekend, just because they’re tied to a Fiat currency or government-backed currency, don’t seem to have the confidence of the crypto. society.
SEANA SMITH: Kavita, given all this uncertainty, how does this change the way you think about your future investments?
KAVITA GUPTA: You know, it’s really funny. I actually tweeted about it. When American and American companies used to ask us and give us the option between sending them stablecoin versus bank buyers, we always went with bank buyers because we were always much more comfortable with that. Now we are also thinking about whether they even have the option of bank transfer? If they can figure it out, that’s great.
But if they don’t, we don’t trust stablecoins between USDC and USDT either. I still have more comfort in USDC, but that’s only because the government and the bigger banks are supportive now. But they lost three of their six banking partners. So what the future looks like is very interesting. More faith in companies outside the US and blockchain crypto space today, which is sad because it is such a great innovation for the US economy to lose out on.
DAVE BRIGGS: Actual. Kavita Gupta, good luck as you navigate all of this really appreciate you being with us, please keep us updated on how it all goes, ok?
