The downfall of Silvergate, a bank that accommodates cryptocurrency, will have a noteworthy effect on the crypto world and its relationship with U.S. banking institutions.
This week, the parent corporation of Silvergate Bank declared its intent to close down and sell off the bank’s assets. This decision followed a $1 billion deficit incurred in the fourth quarter of 2022, which was due to FTX crypto exchange’s failure; FTX was one of Silvergate’s primary customers.
Silvergate’s collapse will most likely bolster the U.S. regulators’ contention that crypto poses a danger to the existing financial infrastructure.
Earlier in 2020, American banking authorities issued a caution to banks concerning the dangers of doing business with crypto-related businesses.
However, crypto industry heads argued against this view, asserting that the failure of Silvergate was more a result of traditional banking risk than its involvement in crypto assets.
Caitlin Long, founder and CEO of Custodia Bank, stated that Silvergate would have stayed afloat during the bank run if it had sufficient funds in its deposits to accommodate customers’ withdrawal demands.
