Crypto Contagion Pours Into Mortgage Lenders Silvergate and Signature

Two cryptocurrency banks have turned to the federal mortgage system to facilitate withdrawals.

Silvergate Capital and Bank Sign have borrowed billions from the Federal Home Loan Banks, the system created to restore loans during the Great Depression, The Wall Street Journal (WSJ) reported Saturday (Jan. 21).

Signature borrowed nearly $10 billion in the fourth quarter, the report said, citing data sources, while Silvergate borrowed $3.6 billion.

The news comes because of reports seen by two banks a jump out of crypto-related deposits from customers, and as the entire industry continues to face the fallout from the fall of FTX last year and the general decline in the sector.

The WSJ notes that loans at Signature – which were mostly run by real estate giants before getting into crypto – are more than four-fold. twice the highest amount borrowed in years, while Silvergate had no bank loans last year.

On a recent earnings call, Silvergate announced a loss of $1 billion for the fourth quarter of 2022. CEO Alan Lane told analysts that the bank plans to stop offering some financial services, stop some crypto security services, and liquidate part of its funds. digital-asset product branding.

As FTX exploded, Silvergate customers withdrew $8.1 billion in deposits in the last three months of 2022.

As PYMNTS wrote last weekThe “discussion about cryptocurrencies and their reliability has grown increasingly polarized,” with Japan begging regulators around the world to treat crypto companies with the same level of supervision as they do traditional banks.

“If you want to implement effective regulation, you must do the same thing as you regulate and supervise traditional institutions,” said Mamoru Yanase, deputy director general of the Financial Services Agency’s Strategy Development and Management Bureau, said. “What has caused the recent crisis is not the crypto technology itself, but the mismanagement, poor internal control and lack of regulation and oversight.”

Similar calls were received from leaders in the US, and Sen. Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., write to the federal financial regulator at the end of last year to find out how they analyze the risk exposure of crypto.

“Banks’ relationships with crypto companies raise questions about the safety and efficiency of our banking system and reveal opportunities that crypto companies may try to exploit to gain more access to banks,” wrote senators.

PYMNTS Insights: Why Clients Are Trying to Become Real Estate Agents

A PYMNTS study, “New Choices: Why Consumers Are Trying Digital Wallets” found that 52% of US consumers tried a new payment method by 2022, with the majority choosing to try wallets numbers for the first time.

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