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EntertainmentIndian cryptocurrency firms run little risk from the collapse of crypto-friendly Signature Bank
Indian cryptocurrency firms run little risk from the collapse of crypto-friendly Signature Bank

Indian cryptocurrency firms run little risk from the collapse of crypto-friendly Signature Bank

The closure of three key US-based lenders, Silvergate Bank, Silicon Valley Bank, and Signature Bank, last week has sent the global cryptocurrency market into a tizzy. But Indian firms need not worry, at least for now.

Cryptocurrency firms are scrambling for banking options outside the US amid concerns over liquidity shortage in the cryptocurrency system, Forbes reported on Friday (March 10).

Silvergate Bank and Signature Bank were squarely focused on digital asset economy. The former alone had $110.36 billion in assets and $88.59 in deposits at the end of 2022, according to New York state’s department of financial services.

However, while the third US lender, Silicon Valley Bank (SVB) has a weak link to digital assets, global industry players still fear an impact as it dealt with venture capital firms involved in cryptocurrency investments. This is what worries some Indian firms, too.

“There may not be any direct risk to Indian crypto exchanges, but maybe the liquidity providers to these exchanges will be affected, and in turn affect the liquidity at Indian exchanges,” Sharat Chandra, co-founder of India Blockchain Forum, told Quartz.

The Indian cryptocurrency market, in any case, began shrinking following the union budget of 2022, which introduced a 30% tax on gains from trading and a 1% tax deduction at source (TDS). This forced users to shift to foreign exchanges like US-based Binance and Coinbase and friendlier economies.

How Indian startups are feeling the heat from SVB’s collapse

A preferred banking partner for many Silicon Valley startups and venture capital firms, SVB has been an integral cog in the Indian startups’ funding wheel for access to venture debt and their own deposits.

At least 20 Indian startups have received funding from SVB, Tracxn’s data show. These include digital payments major Paytm, its parent One97 Communications, jewellery retailer Bluestone, automotive platform Carwale, matrimonial site Shaadi, and home shopping firm Naaptol, among others. However, SVB doesn’t seem to have made any significant investments in Indian startups since 2011.

The closure of Silicon Valley’s largest bank by deposits may slow down venture capital funding, experts say.

“The deals won’t go away. They will be put on pause as VCs would prefer to focus on their portfolio firms. But this could be a very short-term impact,” Abhay Singhal, co-founder of mobile advertising technology company InMobi Group, told Business Standard.

The meltdown could also lead to trouble in meeting payrolls and other day-to-day expenses, according to the newspaper.

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Greg Aftayev is a Journalist at Flaunt Weekly Covering Tech News.

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