Circle’s Potential Loss from Silicon Valley Bank Collapse

03/11/2023 04:33 • Tech Ticker • 130 views

On March 11, according to the analysis of encryption analyst Adam Cochran, according to the recovery process of FDIC (Federal Deposit Insurance Corporation of the United States) and referring to the collapse of Southern Pacific Bank in 2003, FDIC will first pay a one-time dividend (about 62%), and pay 94% of the capital at the time of final payment. If Silicon Valley Bank is similar to this situation, the maximum loss of Circle is $198 million of $3.3 billion, which is easily covered by Circle’s interest income.

Analyst: According to the recovery process of FDIC, Circle’s losses are easily covered by interest income

Analysis based on this information:

On March 11, in an analysis conducted by encryption analyst Adam Cochran, a potential scenario for Circle’s potential loss from the possible collapse of Silicon Valley Bank was explored. Cochran referenced the recovery process of FDIC and the Southern Pacific Bank collapse in 2003 to shed light on how FDIC might pay back the depositors in case Silicon Valley Bank fails to meet its obligations.

According to Cochran, based on the Southern Pacific Bank’s case, FDIC will first pay a one-time dividend, covering approximately 62% of the depositors’ funds up to $250,000 per account. FDIC will then pay the remaining capital, amounting to 94%, at the time of the final payment.

Based on these assumptions, Cochran estimated the maximum loss that Circle might incur to be around $198 million out of their $3.3 billion in deposits, easily recoverable from Circle’s substantial interest income.

This analysis is crucial for Circle as Silicon Valley Bank, its primary banking partner, is currently under scrutiny by multiple regulatory agencies due to violations of anti-money laundering (AML) regulations. This situation has prompted Circle to take steps to reduce its dependence on Silicon Valley Bank, including partnering with other banking institutions.

In conclusion, Cochran’s analysis provides valuable insights for Circle and other institutions that rely on banking partnerships to conduct their business. While businesses can manage risks by diversifying partnerships, it’s always essential to prepare for a worst-case scenario by conducting thorough assessments of the recovery process and potential losses.

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Circle’s Potential Loss from Silicon Valley Bank Collapse

Analyst: According to the recovery process of FDIC, Circle’s losses are easily covered by interest income

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