Billions Worth of Crypto Trades at Risk as Bank Shutdowns Take Toll

tech.hindustantimes.com:

The digital-asset market is coming off of a turbulent year featuring a number of high-profile blowups. Now, two shutdowns in the banking industry — SVB Financial Group's Silicon Valley Bank and Silvergate Capital Corp. — have set off a fresh set of stresses.

SVB's failure triggered a knock-on effect in the crucial market for stablecoins after digital-asset giant Circle Internet Financial Corp., one of the biggest issuers of the widely used tokens known for their perceived safety, revealed it had $3.3 billion of reserves with the bank. The news caused Circle's token, USD Coin, to slip below its intended 1-for-1 peg with the dollar, sending a shock through the market.

As concerning as USD Coin's de-peg was, it is the shutdown of crypto-friendly bank Silvergate — and the shuttering of its electronic payments platform, the Silvergate Exchange Network — that may resonate even more.

For years in the early evolution of crypto, over-the-counter trading desks, hedge funds and other investors that wanted to dabble in crypto had to go through costly, lengthy and clunky contortions just to move funds between digital assets and banks, because the two types of infrastructure weren't connected. If an investor wanted to wire money from their bank account to an exchange, it could take days via traditional banking channels — often too late to ride the latest market move. Moving funds between exchanges quickly or on weekends wasn't possible, as banks were closed while crypto trades 24/7.

The game-changer came in 2017 when Silvergate established the Silvergate Exchange Network, known as SEN. The platform allowed users including hedge funds and crypto firms like Coinbase Global Inc. to transfer funds seamlessly and nearly instantaneously, at any