Signature Bank and Silvergate reportedly borrowed over $13 billion from the federal home loan system.
The US Federal Home Loan Banks System (FHLB) is lending two billion dollars to major cryptocurrency banks in an effort to reduce the impact of increased withdrawals, according to the Wall Street Journal of January 21.
The FHLB is an association of 11 regional banks across the United States that provide loans to banks and lenders. Founded during the Great Depression to support housing finance, the system has $1.1 trillion in assets and more than 6,500 members.
The company reportedly borrowed nearly $10 billion from Signature Bank in the last quarter of 2022, making it one of the bank’s largest lending transactions to date. away. In 2018, Signature received approval from the New York Department of Financial Services for a blockchain-based digital platform. Silvergate is the second bank to apply for financing from the FHLB, receiving at least $3.6 billion. In the last quarter of 2022, Silvergate received a large deposit and took steps to raise capital, including the sale of debt securities. The net loss to shareholders during that period was $1 billion, Cointelegraph reported.
According to Silvergate’s report, customer deposits in digital assets in the fourth quarter of 2022 were $7.3 billion, lower than the previous decade, when deposits reached $12 billion. Traditional finance remained immune to crypto contagion following the collapse of FTX, but FHLB lending to crypto-exposed banks could increase this risk, the report notes.
In comments to the WSJ, Senator Elizabeth Warren said “that’s why I warned of the dangers of allowing crypto to intertwine with the banking system,” saying taxpayers shouldn’t ” keep your arms up if the crypto industry collapses.” which she called “fraud, money laundering, and illicit financing”.
The collapse of the FTX Group has caused a ripple effect in the crypto industry, affecting many businesses. In the latest development, crypto lender Genesis filed for Chapter 11 bankruptcy on January 19, with debts estimated between $1 billion and $10 billion.