Amid the fallout of Silicon Valley Bank’s (SVB) collapse, a wide variety of narratives have been advanced to explain how and why the neo bank fell apart and how the market should respond. Though the reason for SVB’s insolvency is still muddy based on company communications, the fact remains that SVB was a critical financial component of many important organizations in the fintech world. Some voices have cried out for continued faith in SVB and other neo banks, arguing that fintech has no reason to reexamine how it does business.
For industry mainstays like David Schwartz, however, there’s no two ways about it: anyone who still has money invested in SVB or a similarly uninsured bank is making a poor decision. As Chief Technology Officer of Ripple Labs and Co-Founder of XRPL, Schwartz is perfectly positioned to see how SVB’s business practices led to its downfall, not unforeseeable market forces as some of its defenders have claimed.
“Nothing about SVB's KYC policies or who they extended credit to seems to have anything whatsoever to do with how they became insolvent,” Schwartz shared on Twitter. “And anyone who keeps uninsured funds on deposit with an insolvent bank is not a bright person.”