What the White House Thinks About Silvergate’s Troubled Waters

White House Keeps a Watchful Eye

The Biden administration is on high alert regarding the recent turmoil at Silvergate Bank, a central player in the crypto finance world. Press Secretary Karine Jean-Pierre stated on March 6 that the administration is aware of the situation and committed to monitoring developments closely.

Crypto’s Titanic Struggles

Silvergate has been in a bit of a pickle lately, with reports emerging of significant issues affecting another crypto-focused bank. Jean-Pierre pointed out that recent guidance releases from banking regulators on protecting against crypto-related risks are a signal that things might not be smooth sailing.

The 10-K Delay Drama

Worries about Silvergate’s financial health came to a head when the bank delayed its annual 10-K report. You know, that super serious document that gives a snapshot of a company’s financial status? Yeah, it got pushed back by two weeks, and not surprisingly, alarm bells started ringing.

Coinbase Takes a Stand

As the news sank in, Coinbase, one of the larger players in the crypto exchange arena, couldn’t ignore the red flags anymore. On March 2, they announced they would terminate their partnership with Silvergate, especially in light of a Justice Department investigation linked to the FTX collapse. Citing caution, they made it clear: “All client funds continue to be safe, accessible & available.” But still, no one likes getting into business with stiff competition from the law.

The Domino Effect

Coinbase isn’t alone in this game of distancing. Other big names like Circle, Paxos, and Bitstamp have also opted to sever connections with Silvergate, further indicating the growing unease.Uh-oh. On March 4, Silvergate announced the closure of its digital asset payment network, the Silvergate Exchange Network. That’s definitely not a smooth move for a bank going through rough financial seas.

Stocks and Market Impacts

The fallout has been substantial. Silvergate saw its stock price plummet by around 60% since March 1. No doubt some folks are checking their portfolios twice. Meanwhile, the total crypto market cap dropped about 5.5%, illustrating how interconnected these financial institutions are with the overall confidence in digital currencies.

The Regulatory Ramifications

As economist Noelle Acheson pointed out in a conversation with CNBC, if Silvergate were to file for bankruptcy, it would hand regulators a golden opportunity to tighten the noose around the crypto industry. Until now, the fallout from previous issues has mostly stayed within the crypto bubble. Acheson warns that effectively, “If Silvergate goes under then the regulators will be able to say ‘aha, systemic risk, we told you so.’” Cue the ominous soundtrack!

What’s Next?

As all eyes remain on Silvergate and its next move, the White House has made it clear: they’re monitoring reports and pushing for Congress to take action on crypto regulations. So, whether you’re in crypto or just watching from the sidelines, stay tuned. The saga continues!