These Indian Crypto Firms Are Prone to the Risk from the Signature of Bank's Collapse

The failure of three major US-based lenders, Silvergate Bank, Silicon Valley Bank, and Signature Bank, last week shook the global cryptocurrency market. However, Indian firms should not be concerned for the time being and crypto firms are prone to risk.

According to Forbes, Indian crypto firms are looking for banking options outside of the United States due to concerns about a liquidity shortage in the cryptocurrency system.

Silvergate Bank and signature bank's collapse were both solely concerned with the digital asset economy. According to the New York State Department of Financial Services, the former had US $110.36 billion in assets and US $88.59 billion in deposits at the end of 2022.

While the third US lender, Silicon Valley Bank (SVB), has a tenuous connection to digital assets, global industry players are concerned about the impact because it has dealt with venture capital firms involved in cryptocurrency investments. This is something that concerns some Indian crypto firms as well.

"There may be no direct risk to Indian crypto exchanges, but liquidity providers to these exchanges may be affected, affecting liquidity at Indian exchanges," Sharat Chandra, co-founder of the India Blockchain Forum, told Quartz.

In any case, the Indian cryptocurrency market began to contract following the 2022 union budget, which included a 30% tax on trading gains and a 1% tax deduction at source (TDS). This compelled user to switch to foreign exchanges such as US-based Binance and Coinbase, as well as friendlier economies.

How Indian startups are dealing with the fallout from SVB's demise

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

According to Tracxn data, SVB has funded at least 20 Indian startups. Paytm, its parent company One97 Communications, jewelry retailer Bluestone, automotive platform Carwale, matrimonial site Shaadi, and home shopping firm Naaptol are among them. SVB, on the other hand, does not appear to have made any significant investments in Indian startups since 2011.

According to experts, the closure of Silicon Valley's largest bank by deposits may slow venture capital funding.

The deals aren't going away. They will be put on hold because venture capitalists would rather focus on their portfolio companies. However, this could have a very short-term impact, according to Abhay Singhal, co-founder of mobile advertising technology company InMobi Group.

According to the newspaper, the meltdown could also cause problems with payroll and other day-to-day expenses.