Badly seen in light of numerous bankruptcies and scams over the past year, the cryptocurrency industry is in a dire straits. Now banks are under pressure to cut ties with crypto companies.
One of the biggest examples is the Silvergate bank. Known as the “Bitcoin Bank” for its involvement in various cryptocurrency companies, the institution reported a net loss of US$948.7 billion (R$4.9 billion) last year.
Even if the loans to MicroStrategy – to buy more Bitcoin – are irrelevant, Silvergate’s exposure to the FTX exchange was enough to cut its share price in half within a few weeks.
In the last quarter of 2022, Silvergate was surprised by a US$8.1 billion (R$42 billion) wave of withdrawals.
Another hit was Signature Bank. While also being a cryptocurrency-friendly bank, Binance stated that it will stop processing transactions smaller than $100,000 (R$518,000) as early as February, which will affect most users.
Due to exposure to cryptocurrencies, both banks had to turn to the Fed. According to The Wall Street Journal, while Silvergate resorted to borrowing US$3.6 billion (R$18.65 billion) from the Fed, Signature reached out for another US$10 billion (R$51.8 billion). billion).
So it is normal that no American body is happy with this contamination.
Earlier this year, the US Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) issued a warning to banks. Meanwhile, the US Securities and Exchange Commission (SEC) continues to reject mock Bitcoin ETF applications.
Banks were hit, but they weren’t the only ones.
While the amounts presented above attract attention, the cryptocurrency contagion has also affected sectors other than banking, which is perhaps even more concerning.
The biggest example is of course the bankruptcy of FTX. For example, eSports team TSM has signed another $1 billion contract with the exchange. Another victim was the Mercedes F1 team. Additionally, the Miami Heat basketball team’s arena also removed FTX from its name earlier this year.
That is why US regulators are trying to prevent new infections from arising, especially at banks. However, the companies themselves are already suspicious and shun involvement in the sector.
Source: Live Coins
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
