Wednesday, June 12

Silvergate collapse: Crypto turmoil continues

Silvergate Bank Struggles Amid Crypto Turmoil, Ending Years of Stability in US Banking。

Silvergate Bank, a San Diego-based bank focused on cryptocurrency customers, is scaling back operations after a wave of customer withdrawals. The bank’s woes show that the ongoing crisis in cryptocurrencies is spilling over into the regulated U.S. financial system. Silvergate’s troubles also end a multi-year period without any U.S. bank failures—an unusually long stretch of stability.

Silvergate’s issues stem from the collapse of one of its biggest clients, the cryptocurrency exchange FTX. The FTX failure led many of Silvergate’s customers to panic and withdraw funds, putting major pressure on the bank. Regulators are also worried about Silvergate’s difficulties, as turmoil from cryptocurrencies begins to infect regulated finance.

No U.S. banks failed in 2021 or 2022, marking two straight years of an unusual “goldilocks” period. But Silvergate’s crisis appears to be ending that streak, signaling that economic strains may be taking a toll.

The news highlights how threats from cryptocurrency turmoil can spread to traditional finance through banks with exposure to crypto clients. Silvergate’s troubles show that crises from cryptocurrencies can bleed into the overall financial system, garnering close scrutiny from regulators who may issue stricter rules. The developments indicate ongoing volatility in cryptocurrencies may sound an alarm for other exposed institutions.

Overall, Silvergate Bank seems poised to curb some operations due to funding pressure from customers withdrawing money after the FTX collapse. The bank’s Crypto-focused business model left it vulnerable when parts of the cryptocurrency market seized up, ending a remarkably steady period in U.S. banking. Regulators and the wider market will likely monitor how instability from cryptocurrencies might impact more mainstream parts of finance. 

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