Failing bank Silvergate and FDIC are discussing recovery plans
Failing bank Silvergate and FDIC are discussing recovery plans Mike Dalton · 3 hours ago · 2 min read
Silvergate could seek investments from others in the crypto industry.
2 min read
Updated: March 8, 2023 at 12:15 am
Cover art/illustration via CryptoSlate
Failing crypto bank Silvergate is exploring ways to make a recovery with U.S. regulators, according to a report from Bloomberg on March 7.
Officials have visited Silvergate HQ
Bloomberg reported that Federal Deposit Insurance Corp (FDIC) officials visited Silvergate’s California headquarters last week with authorization from the Federal Reserve.
Silvergate has not yet decided how to handle its financial issues, which began last week. However, the crypto-friendly bank could seek investments from elsewhere in the cryptocurrency industry in order to regain liquidity, according to the report.
Bloomberg also said that, in spite of the FDIC’s involvement, the bank may be able to make a recovery without further engagement with regulators.
Neither Silvergate nor the FDIC have publicly commented on the matter. Bloomberg instead cited a number of sources who are familiar with the company.
Why Silvergate is at risk of failure
On March 1, Silvergate submitted a filing to the SEC to report a delayed 10-K filing.
That filing additionally revealed that Silvergate faces inquiries from regulators including the Department of Justice (DOJ). Those inquiries are likely related to Silvergate’s role in the collapse of FTX and Alameda Research last year, as reported in February.
Silvergate also said in its filing that it is evaluating of its capacity to “continue as a going concern,” leading many to become concerned about its stability.
The value of Silvergate shares (SI) rapidly declined in the days following its SEC filing. As of March 7, the stock is worth $5.21, down more than 61% from $13.53 on March 1.
Several crypto companies have withdrawn from Silvergate’s services while others have reported minimal exposure to the firm. On the weekend, Silvergate announced that it would shut down its Silvergate Exchange Network (SEN) while keeping other services open.
The White House said on March 6 that it is aware of Silvergate’s situation. It noted that the bank is one of many struggling crypto firms but declined to make a specific comment.
Citigroup believes CBDCs will lead the way to mass adoption
Citigroup believes CBDCs will lead the way to mass adoption Assad Jafri · 18 hours ago · 2 min read
Citi said that mass adoption will happen when more than a billion people are using blockchain technology without knowing they’re using it.
2 min read
Updated: March 30, 2023 at 6:30 pm
Cover art/illustration via CryptoSlate
U.S. banking giant Citigroup believes that mass adoption is six to eight years away and will be driven by central bank digital currencies (CBDCs) and the tokenization of financial, gaming and real-world assets, according to the lender’s latest blockchain report.
Citi compared blockchain innovation to the early days of gas-powered vehicles or digital cameras and said that the world usually does not recognize the value and benefits of disruptive technologies at first. This factor is compounded by the nature of blockchains, which are a “backend infrastructure technology with no prominent consumer interface,” unlike automobiles and cameras.
However, Citi believes that the mass adoption of blockchain tech will happen in the near future as it starts to establish itself in real-world use cases. Citi said:
“Momentum on adoption has positively shifted as governments, large institutions, and corporations have moved from investigating the benefits of tokenization to trials and proofs of concept.”
Citi’s recipe for mass adoption
According to the research report, mass adoption will happen when more than a billion people are using blockchain technology without knowing they’re using it.
The lender believes this will most likely happen through CBDCs as more and more governments start implementing digital currencies in their economies. As of March, more than 20 central banks plan to issue or have already issued a digital currency — giving almost 2 billion people access to digital money in the coming years.
Citi projected CBDCs to hit a combined market cap of $5 trillion by 2030 in major economies and said that roughly 50% of them would be linked to distributed ledger technology.
Citi noted that CBDCs will allow people to interact and experiment with digital currencies in a relatively secure environment due to state-backing, which is a good thing for the overall adoption of blockchain tech despite most central banks not using it for their CBDCs.
Social media payments and gaming
Citi said that beyond CBDCs, blockchain-based social media payments and the tokenization of gaming assets will play a major role in driving the adoption of blockchain technology among the general public.
Almost every social media platform is currently in the process of enabling digital payments and some — like Telegram and WhatsApp — have made considerable progress.
Telegram recently launched blockchain-based payments for USDT, allowing users to send and receive the stablecoin via messages. The app has been a stalwart proponent of cryptocurrencies and blockchain payments almost since its inception.
Meanwhile, the tokenization of in-game assets is expected to drive adoption among more than 3 billion gamers worldwide. However, web3 games need to be as good as non-web3 games for this to happen, according to the report.
Citi said that gamers don’t care about the technology being used in their games, they only care about the quality of the game and will easily switch to a web3 equivalent of their favorite if one exists. The lender noted that even if only a fraction of the gaming community adopts blockchain-based games it will still result in a significant increase in adoption numbers.
“With over 3 billion gamers worldwide today, we are likely to see nearly 50 million to 100 million adopt games with some element of Web3 or blockchain by 2025.”
Additionally, the lender believes that the tokenization of financial and real-work assets is expected to grow 80x in private markets over the coming years and could also become a significant driver of mass adoption.
FDIC to sell Signature’s Signet network; remaining bank clients given cutoff date
FDIC to sell Signature’s Signet network; remaining bank clients given cutoff date Mike Dalton · 3 hours ago · 1 min read
Signature Bank’s closure process continues weeks after its initial failure.
1 min read
Updated: March 29, 2023 at 9:12 pm
Cover art/illustration via CryptoSlate
The Federal Deposit Insurance Corp. (FDIC) aims to sell Signature Bank’s Signet payments network, according to a report from Bloomberg on March 28.
That plan has not been officially announced. Rather, Bloomberg’s report cites a spokesperson who confirmed that the FDIC intends to proceed with the sale.
Previously, on March 19, New York Community Bankcorp and its subsidiary, Flagstar Bank, acquired parts of Signature Bank from the FDIC. However, that acquisition did not extend to certain parts of the company including Signature’s Signet network.
Signet instead remained under the control of the FDIC, which originally took control of Signature Bank on March 13 following the collapse of competing banks.
Certain cryptocurrency companies, including Coinbase, relied on the Signet network at times. The network allowed for faster settlements than some traditional options.
The latest Bloomberg report also indicates that customers who remain with Signature Bank must close their accounts and transfer their money elsewhere by April 5. Customers who do not withdraw their funds by that date will receive a check with their balance.
Access to crypto
Law Firm’s White Paper Claims US Bank Regulators Are Waging A ‘Clandestine Financial War’ Against Crypto Businesses
According to a recent white paper published by four members of the law firm Cooper & Kirk, PLLC, U.S. bank regulators are attempting to “drive crypto businesses out of the financial system.” The paper, titled “Operation Chokepoint 2.0,” claims that after laying the groundwork by labeling lawful businesses as “reputationally risky,” federal bank regulators, with the help of state officials, “turned to the task of purging their accounts from each of the banks subject to their supervision.”
Constitutional Issues Raised by Operation Chokepoint 2.0: Depriving Businesses of Due Process and Key Structural Constitutional Protections
Five days ago, Bitcoin.com News published an article that examines recent discussions in the crypto community regarding “Operation Chokepoint” and why crypto proponents believe the U.S. government aims to eliminate access to cryptocurrencies. On Monday, the Washington D.C. law firm Cooper & Kirk published a white paper on the subject, noting that U.S. bank regulators are ostensibly waging a “clandestine financial war” against the crypto industry.
The paper’s authors, David Thompson, John Ohlendorf, Harold Reeves, and Joseph Masterman, begin by explaining “Operation Chokepoint 1.0” before delving into “Operation Chokepoint 2.0.” The first iteration of the alleged operation began by labeling legal and law-abiding crypto entities as “reputationally risky.”
The second stage of the operation attempts to choke the crypto industry by restricting access to on and off-ramps. According to the Cooper & Kirk paper, “in the back rooms of banks around the country, bank examiners explained that those financial institutions that continued to serve customers that the federal regulators had labeled ‘reputationally risky’ would suffer the consequences.”
The law firm explains that one of the first acts committed was when the Biden administration’s Office of the Comptroller of the Currency (OCC) rescinded a rule designed to “ensure fair access to banking services for several industries—including debt collection—previously cut off during the controversial Obama-era program Operation Chokepoint.”
The Cooper & Kirk authors further detail that the Federal Deposit Insurance Corporation (FDIC) got involved on April 7, 2022. At that time, the FDIC issued a letter to all institutions under its supervision, asking for information concerning their interest in serving the crypto industry and banks that are already engaged with businesses of this nature. Cooper & Kirk’s white paper asserts that Operation Chokepoint 2.0 is unlawful and unconstitutional.
“Operation Choke Point 2.0 deprives businesses of their constitutional rights to due process in violation of the Fifth Amendment,” the paper’s authors explain. “Operation Choke Point 2.0 violates both the non-delegation doctrine and the anti-commandeering doctrine, depriving Americans of key structural constitutional protections against the arbitrary exercise of governmental power.”
The white paper follows the failures of three major U.S. banks that had connections with the crypto industry, as well as commentary from Signature Bank board member and former politician Barney Frank, who suggested that Signature’s seizure was meant to be an “anti-crypto” message.
Tags in this story
Access to crypto, accounts, anti-commandeering doctrine, bank examiners, Banking, Barney Frank, Biden Administration, Bitcoin, Compliance, constitutional protections, Cooper & Kirk, crypto industry, Crypto Proponents, Cryptocurrency, Customers, Due Process, Enforcement, entities, FDIC, federal regulators, Finance, financial system, financial war, Government, industry, institutions, Law, law-abiding, lawful, legal, non-delegation doctrine, OCC, off-ramps, on-ramps, operation chokepoint, purging, Regulation, Reputation, risk, Signature Bank, state officials, supervision, US banks, White Paper
What do you think about the allegations made in the Cooper & Kirk white paper? Do you believe that Operation Chokepoint 2.0 is unconstitutional, and if so, what actions should be taken to protect the rights of crypto businesses? Share your thoughts in the comments section below.
Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
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