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 U.S. financial regulators had earlier this year already
released a statement in which they cautioned banks about the dangers of working
with enterprises tied to 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.
According to Caitlin Long, CEO & Founder of Custodia
Bank, the bank would have weathered the bank run without losing capital if it
had enough cash in its deposits to cover customers' withdrawal requests.
Check out the most recent Cointelegraph Report and subscribe
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Silvergate crisis