The voluntary liquidation of Silvergate Bank has prompted many to share their thoughts on the source of its problems and the impact on the crypto space of the collapse of the crypto-friendly bank.
From legislators to crypto analysts, through crypto company executives and commentators, almost everyone has something to say about the recent Silvergate announcement.
Some US lawmakers have seized the moment to comment on the state of the crypto industry, labeling it a “risky and volatile sector,” that “extends risk in the financial system.”
the senator Elizabeth Warren called the Silvergate failure “disappointing, but predictable,” calling on regulators to “step up against cryptocurrency risk.”
As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I warned of Silvergate’s risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk.
—Elizabeth Warren (@SenWarren) March 8, 2023
As the bank of choice for cryptocurrencies, the failure of Silvergate Bank is disappointing, but predictable. I warned of risky, if not illegal, activity by Silvergate, and identified serious flaws in the relevant investigation. Now, customers must be compensated and regulators must take action against cryptocurrency risk.
Senator Sherrod Brown also intervened: shared his concern that banks that get involved with cryptocurrencies are putting the financial system at riskand reaffirmed his desire to “establish strong safeguards for our financial system from the risks of cryptocurrencies.”
The senators’ statements have sparked criticism from the community, some arguing that it was not a cryptocurrency issue, and that fractional-reserve banking was to blame.as Silvergate had far more deposits in demand compared to cash on hand.
.@SenSherrodBrownyou’re wrong that #crypto triggered Silvergate’s issue. What did it was $13.3bn in demand deposits that depositors cld withdraw in minutes, but only $1.4bn of cash. Had $YES held $13.3bn of cash, the bank run wouldn’t have impaired its capital. Not a crypto… https://t.co/nGlfHwUcBN
— Caitlin Long ⚡️ (@CaitlinLong_) March 8, 2023
.@SenSherrodBrown, you are wrong to say that cryptocurrencies triggered the Silvergate problem. What it did was have $13.3 billion in deposits that depositors could withdraw in minutes, but only $1.4 billion in cash. If $SI had $13.3 billion in cash, the bank run would not have hurt its capital. It is not a problem regarding cryptocurrencies…
For his part, Several companies have taken advantage of the recent Silvergate announcement to reiterate their lack of ties with the firm or the break thereof.
The CEO of Binance, Changpeng Zhao, assured to customers on Twitter that the crypto exchange has no assets stored at Silvergate, while its counterpart Coinbase has also assured followers that the bank had no customer funds in its possession.
Update: We’re sorry to see Silvergate make the tough decision to wind down their operations. They were a partner & contributors to the growth of the cryptoeconomy. Coinbase has no client or corporate cash at Silvergate. Client funds continue to be safe, accessible & available. https://t.co/78oMrLQ6VH
—Coinbase (@coinbase) March 9, 2023
Update: We are sorry that Silvergate has made the difficult decision to close its operations. They were a partner and contributed to the growth of the crypto economy. Coinbase does not hold cash from clients or companies in Silvergate. Client funds remain secure, accessible and available.
Meanwhile, Nic Carter, co-founder of venture firm Castle Island and cryptocurrency intelligence firm Coin Metrics, suggested that it was the government that “hastened the collapse” of Silvergate by launching investigations and legal attacks against it.
“They are the arsonist and the firefighter at the same time”, wrote.
Ram Ahluwalia, CEO of financial services company Lumida, spoke in similar terms, arguing in a tweet that Silvergate was facing bankruptcy after a senator’s letter undermined public confidence in the company. He said that “Silvergate was denied due process.”
In a previous blog post, Carter referred to “Operation Choke Point 2.0” as ongoing, stating that the US government is using the banking sector to mount “a sophisticated and broad crackdown on the crypto industry.”
Others believe that the collapse of Silvergate will not necessarily hurt the crypto industry, but, along with proposed changes to tax laws, will exacerbate the exodus of crypto companies from the United States.
– Silvergate winding down operations in light of “regulatory developments”
– Proposed changes to capital gains
– Proposed elimination of tax loss harvestingnone of these are bad for crypto…
they’re just reasons for passionate builders to operate outside the US
— Tom️ (@thomasjeans) March 9, 2023
– Silvergate shuts down operations in light of “regulatory developments”
– Proposed changes to capital gains
– Proposal to eliminate the harvest of tax losses
None of these things are bad for the crypto industry… they are just reasons for passionate builders to look to operate outside of the US.
With Silvergate gone, some have also wondered where crypto companies will turn next.
Coinbase, which previously accepted payments through Silvergate, announced on March 3 that it would facilitate institutional client cash transactions for its major clients with its other banking partner, Signature Bank.
However, Signature Bank announced in December its intention to reduce its exposure to the cryptocurrency sector. reducing deposits from customers who own digital assets.
To further reduce your exposure to cryptocurrencies, Signature on January 21 imposed a minimum limit of $100,000 on transactions it would process through the SWIFT payment system on behalf of crypto exchange Binance.
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