What does the Silvergate collapse mean for crypto?

The recent collapse of crypto-friendly bank Silvergate will likely increase regulatory scrutiny on the ties between the crypto industry and the banking sector in the U.S.

The collapse of crypto-friendly bank Silvergate will likley have a significant impact on the crypto ecosystem and its ties with the banking sector in the U.S. 

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 had suffered 1$ billion worth of losses in the last quarter of 2022 as a direct consequence of the collapse of crypto exchange FTX, one of Silvergate’s main clients.

Silvergate was one of the very few regulated financial institutions providing banking services to crypto companies and exchanges. Its downfall will likely reinforce U.S. regulators’ arguments that crypto poses a threat to the traditional financial system.

Earlier this year, the U.S. banking regulators had already issued a statement in which they warned banks about the risks of serving crypto-related companies. 

But crypto industry leaders spoke out against this assessement, pointing out that the crash of Silvergate was more a cause of classic banking risk, rather than of its exposure to crypto assets.

As Caitlin Long, CEO & Founder of Custodia Bank explained, if the bank held enough cash in its deposits to meet customers’ withdrawa request, it would have survived the bank run without impairing its capitalization. 

Find out more about the causes and consequences of the Silvergate meltdown, check out our latest Cointelegraph Report and subscribe to our YouTube channel.

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