Crypto industry braces for impact with Silvergate exit

cointelegraph.com:

Silvergate is not a systematic risk for the United States banking system, but it could have a significant impact on the crypto markets, multiple sources told Cointelegraph. These may include increasing banking concentration in a few partners and challenges for venture capital firms seeking to establish banking relationships in the country.

The bank was a crypto-fiat gateway network for financial institutions and one of the major on-ramps for cryptocurrencies in the United States until March 8, when its parent company, Silvergate Capital Corporation, disclosed plans to "voluntarily liquidate" assets and shut down operations.

The move affects a "huge number of market markers and exchanges" that relied on the bank to process instant crypto-fiat transactions, explained Mark Lurie, CEO and co-founder of Shipyard Software, a decentralized development company. As Silvergate winds down operations, risk concentration in the industry would also increase, with few banks still partnering with crypto firms.

“When I got into Bitcoin back in 2011, I never would have thought that an FDIC-insured bank involved in the industry would actually fail. This is certainly a setback and there will be implications that will reverberate across the digital asset industry for some time. I suspect that it will be difficult for a while for crypto ventures to acquire banking relationships in the United States given the regulatory measures of late," crypto mainstay Charlie Shrem told Cointelegraph.

Related: Gemini’s banking relationship with JPMorgan ‘remains intact’

Crypto exchange FTX's collapse led to extensive liquidity problems at Silvergate, although the bank had already been affected earlier in 2022 by the downturn in crypto markets. Outflows in