- Signature Bank, as well as Silvergate, has taken more than $13 billion from the federal home loan system.
On January 21, The Wall Street Journal reported that the United States Federal Home Loan Banks System is giving billions of dollars to two of the biggest crypto banks in order to reduce the influence of stream in withdrawals.
The Federal Home Loan Bank System is an organization of 11 regional banks in the United States that gives funds to other banks along with lenders. Established at the time of the Great Depression to back housing finance, the system has about $1.1 trillion in assets and more than 6,500 members.
It was reported that the body gave a loan of $10 billion to a commercial bank known as Signature banking in the last four months of the last year, which made it list among the biggest borrowing transactions by a bank in the past few years. In 2018, the Signature got acknowledged by the Department of Financial Services of New York for its blockchain-grounded virtual platform.
The second bank which wanted funds from the FHLB was Silvergate, which got almost $3.6 billion. In the last four months of the last year, Silvergate faced important discharges of deposits and took measures to keep cash liquidity, involving selling debt securities. The total loss traceable to common shareholders in the duration is calculated to be $1 billion.
As per the report of Silvergate, the average digital asset client deposits in the last four months of 2022 were about $7.3 billion, a crucially low amount as compared to the earlier quarter when deposits touched $12 billion. Traditional finance has become immune to crypto contamination after the downfall of FTX, however, FHLB לאָונז to crypto-related banks can surge that risk, as per the report.
In response to WSJ, Senator Elizabeth Warren highlighted, “this is why I have been alerting of the hazards of permitting crypto to be interface with the banking system,” purporting that taxpayers should not, “be given holding the bag for bankruptcies in the crypto ecosystem”, which she referred a market full of scam, money laundering, and illegal finance.”
The FTX’s group downfall consequenced in a ripple effect over the crypto industry, influencing various firms. In the newest advancement, crypto lender Genesis went for Chapter 11 bankruptcy protection on January 19, having liabilities calculated around $1 billion and $10 billion.
Source: https://www.thecoinrepublic.com/2023/01/22/u-s-home-loan-banks-gave-billions-of-dollars-to-crypto-banks/