The collapse of Silvergate, a cryptocurrency-friendly bank, is likely to have a significant impact on the cryptocurrency ecosystem and its relationship with the US banking sector.
Earlier this week, the parent company of Silvergate Bank announced plans to wind down operations and liquidate the bank. The announcement came after the crypto-friendly bank reported $1 billion in losses in the fourth quarter of 2022 as a result of the collapse of cryptocurrency exchange FTX, one of Silvergate’s major clients.
Silvergate was one of the few regulated financial institutions providing banking services to cryptocurrency companies and exchanges. Its fall is likely to bolster US regulators’ arguments that cryptocurrency threatens the traditional financial system.
Earlier this year, banking regulators in the United States issued a statement warning banks about the risks of serving cryptocurrency-related businesses.
But cryptocurrency industry leaders have spoken out against that assessment, stating that Silvergate’s collapse was caused more by traditional banking risks than exposure to crypto assets.
As Caitlin Long, founder and CEO of Custodia Bank, points out, Silvergate would have survived the bank’s inflows without diluting its capitalization if it had enough cash in its deposits to meet withdrawal requests from customers.
To learn more about the causes and consequences of the Silvergate meltdown, check out Latest Cointelegraph video report on YouTube – And don’t forget to subscribe!