The collapse of Silvergate, a crypto-friendly financial institution, will seemingly considerably affect the crypto ecosystem and its ties with the U.S. banking sector.
Earlier this week, the dad or mum 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 price of losses within the final quarter of 2022 as a consequence of the collapse of crypto trade FTX, certainly one of Silvergate’s main purchasers.
Silvergate was one of many few regulated monetary establishments offering banking providers to crypto firms and exchanges. Its downfall will seemingly reinforce U.S. regulators’ arguments that crypto threatens the standard monetary system.
Earlier this 12 months, U.S. banking regulators issued an announcement warning banks concerning the dangers of serving crypto-related firms.
However crypto trade leaders spoke out towards this evaluation, stating that the crash of Silvergate was extra a reason behind traditional banking danger than its publicity to crypto property.
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 be taught extra concerning the causes and penalties of the Silvergate meltdown, try Cointelegraph’s newest video report on YouTube — and don’t overlook to subscribe!
