Silvergate’s troubles may make it harder to get out of crypto and into dollars.
“If Silvergate goes out of business, it’s going to push funds and market makers further offshore.”
The laundry list of customers helps to explain why Silvergate’s woes are frightening. Very few banks will touch crypto because it’s so risky — and most traditional banks don’t let crypto clients transact in dollars 24/7. Access to banking that moves at the pace crypto does is rare, and only one other US bank can do it.Barron’s
. The issue is how easy it is to get into actual cash dollars, which in finance-speak is called liquidity. Less liquidity makes transactions more difficult. Already there is a broader gap between the price at which a trade is expected to go through at and the actual price at which it executes, Wu said.Silvergate’s SEN was an important on- and off-ramp from the almighty dollar into crypto. In 2022, Lane said all the “regulated, US-dollar backed stablecoin issuers” banked at Silvergate.
But for stablecoins issued by Circle, Paxos, and Gemini, among others, the SEN was important for making and burning their tokens, which were issued when someone deposited a dollar in their Silvergate bank accounts, Lane said.Silvergate was a pass-through point for crypto. Stablecoins that are backed by dollars at leasthave cash or cash-like assets sitting in reserve somewhere.
Now, this being finance, taking more risk also may mean more profit. So Silvergate seems to have bought bonds. (
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