Regulatory Concerns Over BlockFi’s $227 Milliom Investment In SVB
Cryptocurrency lending platform, BlockFi, has been warned by the bankruptcy trustee that $227m of funds held in Silicon Valley Bank (SVB) may go against bankruptcy laws. This is because the funds are allegedly not protected by the Federal Deposit Insurance Corporation’s (FDIC) deposit insurance as they are invested in a money market mutual fund, which may be illegal per bankruptcy laws.
BlockFi has been warned by the bankruptcy trustee that the $227m the company has in Silicon Valley Bank (SVB) may go against bankruptcy lawshttps://t.co/D772lJkY0l
— crypto.news (@itscrypto_news) March 11, 2023
BlockFi previously filed for bankruptcy in November 2022 following FTX’s collapse. According to documents released on Friday about the bankruptcy proceedings, BlockFi has $227m in funds stored at SVB, which is now closing.
FDIC Scrutiny
The California Department of Financial Protection and Innovation announced early Friday that SVB would be closing, and several cryptocurrency companies, including BlockFi, have disclosed their exposure to the bank. Documents released as part of the bankruptcy proceedings show that BlockFi’s investment is “not guaranteed by the bank,” not insured by the FDIC, and not covered by any other federal government agency. The FDIC provides coverage for deposits up to $250,000 per depositor, but not the full range of money market funds.
Per new bankruptcy filing, BlockFi has $227m in Silicon Valley Bank. The bankruptcy trustee warned them on Mon that bc those funds are in a money market mutual fund, they’re not FDIC secured — which could be a prblm w/ keeping in compliance of bankruptcy law pic.twitter.com/hnpo8anrrS
— Lauren Hirsch (@LaurenSHirsch) March 10, 2023
Protecting Insured Depositors
The U.S. Securities and Exchange Commission regulates money market mutual funds, which invest in highly liquid short-term securities like cash equivalents, cash, and brief debt instruments. As a result of Silicon Valley Bank’s collapse, the FDIC announced that by March 13, all insured depositors would have full access to their insured accounts and that uninsured depositors would receive certificates for the amounts of their uninsured money.
Call to Action
The warning issued to BlockFi highlights the need for greater regulatory oversight in the cryptocurrency industry to protect investors. As the industry grows, companies must be transparent about their practices and comply with all laws and regulations.
The cryptocurrency industry is still relatively new, and regulations are still evolving. However, it is crucial that companies in the industry take their responsibilities seriously and operate with integrity. The warning issued to BlockFi should serve as a reminder to all other cryptocurrency lending platforms to ensure they comply with all relevant laws and regulations to protect themselves and their customers.
