The demise of cryptocurrency-friendly bank Silvergate is likely to have a big effect on the cryptocurrency ecosystem and its connections to the American banking industry.
The parent business of Silvergate Bank made intentions to shut down operations and liquidate the bank earlier this week. The announcement was made after the crypto-friendly bank lost $1 billion in the final quarter of 2022 as a direct result of the failure of the major client of Silvergate, the cryptocurrency exchange FTX.
One of the very few regulated financial institutions, Silvergate offered banking services to cryptocurrency businesses and exchanges. Its demise will probably support the claims made by American regulators that cryptocurrency poses a threat to the established financial system. The American banking regulators had already released a statement earlier this year in which they cautioned banks about the dangers of doing business with enterprises involved in cryptocurrencies.
Leaders in the crypto sector disagreed with this assessment, arguing that Silvergate’s failure was more related to traditional banking risk than to its exposure to cryptocurrencies.
