The US Federal Home Loan Banking System (FHLB) has lent billions of dollars to the two largest cryptocurrency banks to cushion the impact of a surge in withdrawals, according to a January 21 Wall Street Journal report. increase.
FHLB is a consortium of 11 regional banks across the United States that provide funding to other banks and lenders. Established to help with housing finance during the Great Depression, the system has $1.1 trillion in assets and he has over 6,500 members.
The entity reportedly lent about $10 billion to commercial bank Signature Bank in the fourth quarter of 2022, making it one of the largest borrowing deals by a bank in recent years. In 2018, Signature received approval for its blockchain-based digital platform from the New York Department of Financial Services.
The second bank to request funds from FHLB was Silvergate, which received at least $3.6 billion. In the final quarter of 2022, Silvergate experienced a significant outflow of deposits and took steps to maintain cash liquidity, including the sale of debt securities. According to Cointelegraph, net losses attributable to common shareholders during this period totaled $1 billion.
RELATED: BIS Proposes Research Model to Study DeFi and TradFi Integration and Its Risks
According to a Silvergate report, average digital asset customer deposits in the fourth quarter of 2022 were $7.3 billion, significantly lower than the previous quarter when deposits reached $12 billion.
While traditional finance was immune to the crypto contagion after the FTX demise, FHLB loans to crypto-exposed banks could increase that risk, the report notes. increase.
“This is why I have been warning of the dangers of allowing cryptocurrencies to become entwined with the banking system,” Sen. You shouldn’t be holding a bag for the sake of it,” he argued. industry,” she called a market filled with “fraud, money laundering and illicit finance.”
The collapse of the FTX group had ripple effects throughout the cryptocurrency industry, affecting many companies. In the latest development, cryptocurrency lender Genesis filed for Chapter 11 bankruptcy protection on Jan. 19, with debts estimated at $10 billion from his $1 billion. I was.
