The collapse of Silvergate, a crypto-friendly financial institution, will probably considerably affect the crypto ecosystem and its ties with the U.S. banking sector.
Earlier this week, the mum or dad firm of Silvergate Financial institution introduced plans to wind down operations and liquidate the financial institution. The announcement got here after the crypto-friendly financial institution suffered $1 billion value of losses within the final quarter of 2022 as a consequence of the collapse of crypto change FTX, one in all Silvergate’s main shoppers.
Silvergate was one of many few regulated monetary establishments offering banking providers to crypto corporations and exchanges. Its downfall will probably reinforce U.S. regulators’ arguments that crypto threatens the normal monetary system.
Earlier this 12 months, U.S. banking regulators issued a press release warning banks in regards to the dangers of serving crypto-related corporations.
However crypto business leaders spoke out towards this evaluation, declaring that the crash of Silvergate was extra a reason for traditional banking danger than its publicity to crypto belongings.
As Caitlin Lengthy, founder and CEO of Custodia Financial institution, defined, Silvergate would have survived the financial institution run with out impairing its capitalization if it had held sufficient money in its deposits to satisfy prospects’ withdrawal requests.
To study extra in regards to the causes and penalties of the Silvergate meltdown, try Cointelegraph’s latest video report on YouTube — and don’t neglect to subscribe!
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