Is The Federal Home Loans Bank System Implementing A Savings Of The 2 Biggest Crypto Banks?

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Signature Bank and Silvergate, two of the biggest crypto banks, have received billions in loans from the Federal Home Loan Banks, a system originally designed to support housing and community investments.

According to a Saturday report from the Wall Street Journal, Signature Bank received nearly $10 billion in loans from its local bank in the last quarter of 2022 while Silvergate received less than $3.6 billion.

Signature’s loans are more than double their highest volume in years, but 2022 marks the first year for Silvergate to use home-loan financing, the report said. .

The Federal Home Loan Banks are 11 U.S. federal banks that provide loans to corporations. Founded during the Great Depression, the system has $1.1 trillion in assets and more than 6,500 members and was originally designed to support housing and public investment.

While the FHLB provides loans to other financial institutions that have nothing to do with it, some markets have warned that lending to crypto-exposed banks could lead to the crypto epidemic spreading to traditional financial company.

Senator Elizabeth Warren, who has been a vocal critic of the crypto industry, expressed concern about the growing relationship between crypto-exposed banks and TradFi companies. In comments to the WSJ, he said:

“This is why I warn about the dangers of allowing crypto to be associated with the banking system. money.”

Signature Bank and Silvergate turned to home-lending banks last year after the collapse of the cryptocurrency exchange FTX, which destroyed people’s trust in the industry and led to a rise in spending.

As reported, Silvergate suffer in a bank after the FTX crash. Apart from making loans, the crypto bank also had to sell $5.2 billion in debt securities it held on its balance sheet at a huge loss including $8.1 billion in withdrawals. used. The result was a loss of $718 million, which was reported to be more than the bank’s net income since 2013.

In addition, Silvergate’s deposits were only $3.8 billion at the end of 2022, compared to $11.9 billion in 2021. Likewise, deposits at Signature fell to less than $89 billion last year from nearly $103 billion at the beginning of 2022.

Recent developments in the crypto market have also pushed some banks to exit the crypto space. Moonstone Bank, a digital bank focused on serving individuals, is one of the banks, which has hearing will focus again on the role of “community financing”.

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