Last Updated: 23 January 2023
Cash flows in the world of cryptocurrency are under pressure. Many traditional banks do not do business with the big players in the industry for various reasons. They therefore rely on banks like Silvergate and Signature Bank. Both banks are popular in the crypto world. But that also comes with drawbacks. In times of dire need, people knock on banks’ doors.
Two of the biggest banks to cryptocurrency companies are rushing to stem customer withdrawals by borrowing billions from a system originally designed to support mortgage lending https://t.co/s32fDp2zLv
— The Wall Street Journal (@WSJ) January 21, 2023
Silvergate could painfully cough up over $8.1 billion to meet demand. The turmoil surrounding FTX in the market made many parties want to withdraw money. Another example is Signature Bank, where the amount involved was even around $10 billion. According to the Wall Street Journal, the banks used the system set up in the United States in the 1930s. The original purpose? The idea was to make the process for mortgages easier. So apparently today, banks like Signature Bank and Silvergate are also finding their way to these lenders.
Federal Home Loan Banks lend relatively cheaply compared to the rest of the banking world. During the violent falls in 2022 and the collapse of several companies, the demand for liquidity was high.