For cryptocurrency investors, maintaining a bank account remains crucial as card payments dominate real-world transactions. This necessity compels crypto enterprises to establish partnerships with banks, though the availability of willing banks is more limited than expected, reflecting a historical trend of constraint.
Silvergate and SEC Lawsuit
In a recent development reported by Bloomberg, the SEC initiated legal action against the now-bankrupt Silvergate Bank in Federal Court on charges of securities fraud. Silvergate, known for its extensive dealings with crypto firms, suffered a bank run and subsequent bankruptcy during last year’s chain of financial collapses. The repercussions of this lawsuit on the crypto market remain uncertain.
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Some U.S. lawmakers attributed the bank’s downfall to crypto market volatility. Yet, unrelated banks also struggled, failing to cover bond discounts amidst the Federal Reserve’s rapid interest rate hikes. In response, the Fed intervened by injecting liquidity into financial institutions to mitigate bankruptcy risks.
Silvergate Bank ceased operations on March 12, 2023. During this period, three crypto-friendly banks folded simultaneously, coinciding with notable declines in crypto values. Speculation suggests that if this investigation implicates crypto-associated entities, BTC prices could see a downturn. However, current indications point towards the bank itself being the primary subject of scrutiny. Additionally, non-crypto banks faced challenges meeting customer cash demands due to similar financial strains, as previously noted.
In conclusion, while this development might temporarily dampen market sentiment, any disconnect between the lawsuit specifics and the crypto sector could potentially reverse BTC’s recent decline. Presently, BTC has seen a marginal dip, with uncertainty lingering over its future trajectory pending further details from the lawsuit.
Update: The lawsuit pertains to Silvergate Bank’s involvement in the FTX collapse. Allegations have been made against executives, though the filed complaint lacks comprehensive details.
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Disclaimer: This article does not constitute investment advice. Investors should acknowledge the high volatility and risks associated with cryptocurrencies, conducting thorough research before making investment decisions.