Popular American asset manager Morgan Stanley (MS) revealed that US regulators are considering clamping down on banks offering services to crypto trading firms. According to the MS report, the collapse of the crypto-friendly bank, Silvergate has led to increased regulatory scrutiny on Binance and Signature Bank.
The Silvergate Debacle
The decision by Silvergate to close shop, citing industry and regulatory concerns, has closed on-ramp access for converting fiat currencies to crypto in the United States. In addition, further regulatory actions might lead to the official ban in other avenues, the MS report noted.
Furthermore, Morgan Stanley noted that there had been a coordinated effort by regulators in the US to highlight the risks of American Banks’ exposure to cryptocurrency. Accordingly, the Federal Reserve, Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) recently warned US banks to consider liquidity risks in offering crypto services.
Analysts Sheena Shah and Kinji C. Steimetz stated that inflows into the crypto sector would only slow down without the ability to offer on-ramps between fiat and crypto. The experts noted that at the center of the ongoing issue is Silvergate Bank due to its key role in the crypto ecosystem.
Also read:As a registered bank in the US offering services to crypto firms, Silvergate has seen its shares drop significantly in the last week. This comes after the bank announced that it is assessing its ability to stay in business and is under investigation by several US agencies.
Meanwhile, the key focus of the crypto community at the moment is the action of another crypto-friendly bank, Signature, the largest crypto exchange, Binance, and further actions regulators will take concerning other crypto firms or services, the MS report noted.
Will The Silvergate Collapse Spell Doom For Crypto?
After announcing its inability to complete the 10-K form last week because of some questions it received from its auditors, Silvergate has shown that it was facing the roughest patch in its history.
The bank is the biggest crypto-friendly financial institution that services some of the most prominent players in the digital asset industry. Hence, its fold-up doesn’t bode well for the rest of the ecosystem.
Its fold-up means regulators have an example to show if a traditional bank gets too exposed to cryptocurrency. Bloomberg stated that with the current situation, crypto firms might be forced to look for other banks that offer their needed services.
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