JPMorgan has weighed in on the recent collapse of crypto bank Silvergate and the termination of its Silvergate Exchange Network (SEN) in a research report, pinpointing the challenge that this poses for the crypto industry.
The Silvergate platform had provided a link for more than 1,000 institutional crypto market participants, allowing them to transfer fiat currency between their Silvergate accounts and the accounts of other Silvergate customers. Replacing this system with a suitable alternative is proving difficult in the current environment, with many traditional banks unwilling to engage with crypto companies, as well as elevated regulatory pressures.
The research note suggested that some of the services formerly provided by Silvergate may be taken on by other banks, such as Signature Bank, Provident Bancorp, Metropolitan Commercial Bank and Customers Bancorp. However, Signature Bank has already announced plans to reduce its reliance on digital asset clients, and the entry of new depository institutions appears unlikely at present due to the intensified regulatory scrutiny of cryptocurrency risks.
The report concluded that this leaves few options for smaller and less-established institutional crypto investors in the US, who may well be forced to look for banking services in Europe or elsewhere.
