The voluntary liquidation of crypto-friendly bank Silvergate has prompted many to share their thoughts on the source of the problem and the wider impact of the bank’s collapse on crypto.
From lawmakers to crypto analysts, crypto company executives to commentators – almost everyone has something to say about Silvergate’s latest announcement.
Several members of the United States parliament used the moment to comment on the state of the crypto industry, labeling it a “risky, volatile sector,” which “spreads risk in the financial system.”
Senator Elizabeth Warren called the Silvergate failure “disappointing, but predictable,” urging regulators to “combat crypto risk.”
As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I was warned of Silvergate’s risky, if not illegal, activity—and recognize the severity of due diligence failure. Now, customers need to be made whole & regulators need to fight crypto risks.
– Elizabeth Warren (@SenWarren) March 8, 2023
Senator Sherrod Brown too arrested in, showing concern that the banks involved in crypto put the financial system at risk, and reaffirming the desire to “establish strong safeguards for our financial system from crypto risks.”
The senators’ remarks have sparked criticism from the public, with some arguing that this is not a crypto issue and that fractional reserve banking is to blame – as Silvergate holds more deposits compared to cash on hand.
.@SenSherrodBrownyou are wrong if #crypto triggering the Silvergate problem. What is $13.3bn in demand deposits that depositors cld withdraw in minutes, but only $1.4bn in cash. Already $SI holding $13.3bn in cash, the open bank will not destroy its capital. No crypto… https://t.co/nGlfHwUcBN
— Caitlin Long ⚡️ (@CaitlinLong_) March 8, 2023
Some companies even used the recent announcement from Silvergate to express their lack of or current relationship with the company.
Binance Crypto Exchange CEO Changpeng Zhao guaranteed customers on Twitter who have no assets stored with Silvergate, while the peer exchange Coinbase has also assured followers that no customer funds were held by the bank.
Update: We are sorry to inform you that Silvergate has made the difficult decision to cease operations. They are partners & contributors to the growth of the cryptoeconomy. Coinbase has no clients or corporate cash in Silvergate. Client funds continue to be safe, accessible & available. https://t.co/78oMrLQ6VH
— Coinbase (@coinbase) March 9, 2023
Meanwhile, Nic Carter, co-founder of venture capital firm Castle Island and crypto intelligence firm Coin Metrics suggested that the government “hastened the collapse” of Silvergate by launching investigations and legal attacks against them.
“They are arsonist and firefighter in one,” he said write.
CEO of financial services company Lumida – Ram Ahluwalia – has a similar opinion, quarrel that Silvergate faces opening the bank after the Senator’s letter has damaged public confidence in the firm, and that “silvergate was rejected due to the process.”
related: Marathon Digital terminated its credit facility with Silvergate Bank
In a previous blog post, Carter referred to “Operation Choke Point 2.0” as underway, stating that the US government is using the banking sector to orchestrate a “sophisticated and widespread crackdown on the crypto industry.”
Others believe that the collapse of Silvergate will not necessarily destroy the crypto industry, but, along with the proposed changes to tax laws, will increase the exodus of crypto companies from the US.
– Silvergate ceases operations due to “regulatory developments”
– proposed changes to capital gains
– Proposal for the abolition of harvest loss taxnothing bad for crypto…
That’s the only reason for builders to operate outside the US
– Tom ️ (@thomasjeans) March 9, 2023
With Silvergate shut down, some are also questioning where the crypto company will go next.
Coinbase, which previously accepted payments through Silvergate, announced on March 3 that it will facilitate institutional client cash transactions for its primary customers with another banking partner, Signature Bank.
Signature Bank, however, announced in December 2022 that it intends to reduce its exposure to the crypto sector by reducing deposits from clients holding digital assets.
To further reduce crypto exposure, on January 21 Signature implemented a minimum transaction limit of $100,000 for transactions to be processed through the SWIFT payment system on behalf of the crypto exchange Binance.