Crypto was at an unfortunate confluence of events this week, which could mean heightened regulatory scrutiny. The industry isn't the problem, though.
Crypto-focused Silvergate , which announced its plans to liquidate this week, is suffering from woes similar to that of failed Silicon Valley Bank . That is, Silvergate's distress is linked to rising interest rates – rather than the whims of digital assets. Silvergate had faced several financial challenges since the collapse of crypto exchange FTX , a former customer. In January, Silvergate reported massive fourth-quarter withdrawals in light of the FTX collapse.
"SVB was the case of a classic bank run combined with an asset-liability mismatch, its demise being accelerated by depositors losing confidence around the same time that SVB had to sell longer-dated fixed income securities at a loss – from where they were held on the balance sheet in order to meet withdrawals," said Amit Sinha, head of multi-asset design at Voya Investment Management.
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