Four parties benefiting from the liquidation of Silvergate Bank[Column]| coindesk JAPAN | Coindesk Japan

Silvergate Bank, once perhaps the most important financial institution in crypto, was hit by a flood of customer withdrawals and was unable to bounce back even with loans from the Federal Home Loan Bank, leaving the banking business in a slump. was liquidated.

Talks with the Federal Deposit Insurance Corporation (FDIC) were reportedly to avoid a liquidation and bolster liquidity, but in retrospect, it appears to have been the final blow.

Silvergate Bank, one of the first to seize the possibilities and opportunities of cryptocurrencies, has grown too big and become a zombie in a world of high volatility.

Silvergate entrusted a huge amount of money (approximately $13.2 billion, approximately $1.8 trillion as of the end of September 2022) from crypto asset companies and invested in US Treasuries and other bonds. However, after the collapse of the cryptocurrency exchange FTX, a flood of customer withdrawals, combined with the repayment of loans from the Federal Home Loan Bank, forced the company to sell government bonds and bonds before maturity. In the fourth quarter of 2022, the sale is said to have resulted in a loss of $1 billion (about 135 billion yen).

Let’s be honest, things aren’t looking good for the crypto industry. But for some, the current situation presents an opportunity. Who will benefit from the liquidation of Silvergate Bank? Let’s take a look at four likely candidates.

1. Other banks

It is the competitors who will benefit most directly from the liquidation of Silvergate Bank. Coinbase, Paxos Trust, Galaxy Digital, and a number of other crypto firms that have sniffed out the danger have “beware of the prudent” New York-based Signature Bank. ).

However, Signature Bank has since been shut down by state authorities. Deposits are now fully protected, but many cryptocurrency companies have to keep their money in a bank somewhere. Despite regulators urging banks to be cautious about dealing with crypto companies, the crypto industry remains a cash-rich industry on paper.

Bloomberg’s Matt Levine said Silvergate’s problems aren’t necessarily rooted in cryptocurrencies themselves.

The “run on the bank” did not start with the collapse of Silvergate Bank’s bitcoin loan business or the bankruptcy of cryptocurrency customers (the FTX bankruptcy was not a direct cause), but rather with the It arose from “the common banking practice of taking short-term borrowings (underwriting deposits from cryptocurrency companies) for long-term lending.”

Of course, there are regulatory concerns and risks. But that’s why we do due diligence. Banks have an opportunity to filter transaction requests from crypto companies, unless it is expressly illegal to provide banking services to them.

Otherwise, logically, nearly all crypto companies would be insolvent, but with $8 billion withdrawn from Silvergate, that Unlikely. That money needs a place to rest.

2. Stablecoin

Analysts at data site Kaiko said Monday that the Silvergate Exchange Network (SEN), developed by Silvergate Bank to make it easier for customers to exchange capital, was reportedly shut down. Stablecoins will become more popular among traders.”

Crypto firms are already familiar with the mechanics of stablecoins pegged to the U.S. dollar. By 2022, stablecoin transactions on centralized exchanges will increase from 79% to 90% of all transactions. Stablecoins have replaced US dollar-based trading pairs in particular, according to analysts at Silkworm.

US private stablecoin issuers also have trouble dealing with banks, and many will be affected by the collapse of Silvergate and Signature, as well as Silicon Valley Bank. Circle, for example, promises to hold an asset of the same value that backs the USD Coin (USDC) in circulation, but that asset must be stored somewhere.

But for smaller companies, it is likely that they will be able to get away with simply exchanging cash for stablecoins.

3. Europe

Unlike the US, the EU has taken a proactive approach to regulating the crypto economy. The “Market in Crypto-Assets: MiCA” law, which is set to come into force soon, will bring regulatory clarity to crypto-asset companies and the financial institutions that serve them.

The problem of crypto assets in the United States will further accelerate the trend of companies considering starting businesses overseas.

As Silkco analysts noted, “BTC-Euro pair hit a record market share last week, nearly tripling market share in a matter of weeks.”

4. Payment company

Oliver von Landsberg-Sadie, CEO of crypto financial services firm BCB Group, said Wednesday that the company’s payments business unit is looking to fill the void left by the absence of “SEN.” He said he was accelerating plans to add US dollar support.

In 2020, BCB launched a real-time payment network, the BCB Liquidity Interchange Network Consortium. It currently supports Euros, British Pounds and Swiss Francs.

Companies like BCB, which offer crypto onramps for banks, are becoming increasingly valuable as a way to absorb risk.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Pawel Czerwinski/Unsplash
｜Original: 4 Potential Winners of the Silvergate Unwind