Al Mayadeen English

  • Ar
  • Es
  • x
Al Mayadeen English

Slogan

  • News
    • Politics
    • Economy
    • Sports
    • Arts&Culture
    • Health
    • Miscellaneous
    • Technology
    • Environment
  • Articles
    • Opinion
    • Analysis
    • Blog
    • Features
  • Videos
    • NewsFeed
    • Video Features
    • Explainers
    • TV
    • Digital Series
  • Infographs
  • In Pictures
  • • LIVE
News
  • Politics
  • Economy
  • Sports
  • Arts&Culture
  • Health
  • Miscellaneous
  • Technology
  • Environment
Articles
  • Opinion
  • Analysis
  • Blog
  • Features
Videos
  • NewsFeed
  • Video Features
  • Explainers
  • TV
  • Digital Series
Infographs
In Pictures
  • Africa
  • Asia
  • Asia-Pacific
  • Europe
  • Latin America
  • MENA
  • Palestine
  • US & Canada
BREAKING
Ritter to Al Mayadeen: Trump has put the international community in a state of threat
Ritter to Al Mayadeen: Trump's theatrical demonstration to save face, but he achieved nothing noteworthy
Democratic Representative Nancy Pelosi: Trump ignored the Constitution in his strikes on Iran
Scott Ritter to Al Mayadeen: Trump’s strikes on Iran are a sow of force
National Nuclear Safety System Center statement: Radiation detection systems reported no signs of contamination, according to recorded data
Iran’s National Nuclear Safety System Center: There is no threat to residents living near the Fordow, Natanz, and Isfahan nuclear facilities
Saudi Arabia's Nuclear and Radiological Regulatory Authority: No radiation leak detected after US attack on Iran's nuclear facilities
Iranian Parliament Member Manan Raisi: No damage has been recorded to underground facilities, and there is no radiation leak
Ansar Allah Political Bureau: The aggression against Iran is a flagrant violation of all international laws and conventions
IRNA:Local residents near Fordow reported no signs of a major explosion

Major banks see profits from crypto leftover, but FTX is a threat

  • By Al Mayadeen English
  • Source: Agencies
  • 22 Nov 2022 15:25
4 Min Read

Crypto trading platform FalconX sent an email on Friday to its clients that Silvergate’s SEN and wires won't be used "effective immediately and until further notice.”  

  • x
  • Silvergate CEO Alan Lane (Protocol)
    Silvergate CEO Alan Lane (Protocol)

As major banks and financial institutions steered away from what Jamie Dimon called a “decentralized Ponzi scheme,” the gap was filled by small lenders who saw profit in helping service companies that include but are not limited to, Silvergate Capital Corp., Provident Bancorp Inc., Metropolitan Commercial Bank, Signature Bank and Customers Bancorp Inc. The latest crackdown and collapse of FTX puts them center-stage.

Silvergate goes back with cryptocurrency to when it first began with just Bitcoin. The former's CEO, Alan Lane, saw potential in building products to serve the market's needs: “What I saw,” he said, “was an opportunity to bank these companies that were essentially being de-risked from other banks.”  

Lane set up a payment network that connects dollars and crypto, through his Silvergate Exchange Network (SEN), which offers users the opportunity to transfer around dollars between each in order to settle their crypto transactions any time during the day or night. The network passed $1 trillion in cumulative payment volumes earlier this year, with one customer being the infamous FTX, whose founder, Sam Bankman-Fried, is now disgraced.

"I'm really sorry, again, that we ended up here. Hopefully, things can find a way to recover," Bankman-Fried, nicknamed the 'King of Crypto', wrote on Twitter on Friday. "I was shocked to see things unravel the way they did."

Bankman-Fried was one of the stars in the crypto field, drawing comparisons to investment magnate Warren Buffett. His net worth used to be over $15 billion. 

Bankman-Fried tried to organize a bailout but failed - this left FTX struggling to raise billions of dollars and many customers unable to retain their money.

The win for Silvergate was that most of its profits were from deposits left by digital customers on its network, which amounted to 90% of the bank’s overall deposit base, almost $11.9 billion. They were later reinvested in securities to earn the $11.4 billion securities portfolio, which generated 2.2% over the three months to September.  

Read next: Brazil awaits approval of new Crypto bill

Related News

FTX sues Binance and ex-CEO Changpeng Zhao, alleging $1.8Bln in fraud

Ex-Binance CEO faces prison time in US over money laundering charges

Left holding the bucket

With FTX now gone as well, according to Silvergate, the company represented less than 10% of deposits from digital asset customers, disclosing that average deposits quarter-to-date plunged down to $9.8 billion. Crypto trading platform FalconX sent an email on Friday to its clients relaying that Silvergate’s SEN and wires won't be used "effective immediately and until further notice.”  

To raise cash, Silvergate will have to resort to its securities portfolio, but rising rates tarnished its value since the bank was already facing $1 billion of unrealized losses at the end of September and a chunk of the portfolio, amounting to $3.1 billion, is in a held-to-maturity sleeve - which accounting prohibit it from touching.

Silvergate’s market value has gone back down to below $1 billion after hitting above $4 billion in a peak from about $200 million in 2020.

'Old banking is boring'

Provident, one of the oldest banks in the US, founded in 1828, became owned by shareholders after it became a stock-holding company, transforming itself into a highly capitalized institution as new shares rolled in with the conversion.

Curious as to how it could invest its excess capital, crypto was the answer, after starting with deposit and cash management services for digital currency, and then it moved onto lending, which Provident supported.

The bank filled its crypto-related loan book with up to $139 million, equivalent to 58% of its equity capital. However, with the market conditions, the bank hinted that losses may possibly amount to $27.5 million due to hold-ups on $104 million of crypto-mining loans.

The Metropolitan Commercial Bank looked after $1.5 billion of deposits, equivalent to about a quarter of its total, from digital-currency businesses in 2021. Voyager Digital, one of its major clients, filed bankruptcy in July which led the Bank downhill since it needed to return deposits to its end-users.

Deposits from digital currency businesses plunged to half, but some banks deny facing reality and claim their crypto businesses are resilient.

Signature Bank has been playing in the digital-asset-deposits game since 2018, and mirrored Silvergate's payment network by previously offering loans collateralized by certain types of cryptocurrencies that are no longer available in the market.

  • FTX
  • Cryptocurrency
  • Silvergate

Most Read

Iran launches 9th wave of Op. True Promise 3, destroys IOF air defense

Iran launches 9th wave of Op. True Promise 3, destroys IOF air defense

  • MENA
  • 17 Jun 2025
Rescue team work at the site where a missile launched from Iran struck Tel Aviv, Israel, Monday, June 16, 2025 (AP)

Wave 12 of Operation True Promise 3 launched, Sejjil deployed: IRGC

  • Politics
  • 18 Jun 2025
Iran launches missile barrage to Tel Aviv, casualties reported

True Promise 3, wave 14: Tel Aviv targeted, casualties reported

  • Politics
  • 19 Jun 2025
Iran's heavy barrages impact multiple Israeli targets overnight

Iran's heavy barrages impact multiple Israeli targets overnight

  • Palestine
  • 18 Jun 2025

Coverage

All
The Ummah's Martyrs

Read Next

All
Iran’s Bavar-373 air defense system on display during a military drill (Mehr News Agency)
Politics

Iran intercepts Israeli drones near Tehran, multiple cities

The Israeli Iron Dome air defense system fires to intercept missiles during an Iranian attack over Tel Aviv, Occupied Palestine, Sunday, June 15, 2025 (AP)
Politics

Iran warns aid to 'Israel' will be treated as aggression

US President Donald Trump arrives to board Air Force One at Joint Base Andrews, Friday, June 20, 2025, en route to Montclair, New Jersey (AP)
Politics

Trump, Erdogan made covert attempts to hold talks with Iran: Axios

Ansar Allah supporters surround a giant Iranian flag during an anti-US and anti-'Israel' weekly rally in Sanaa, Yemen, Friday, June 20, 2025 (AP)
Politics

US ships in Red Sea will be targeted if US attacks Iran: YAF

Al Mayadeen English

Al Mayadeen is an Arab Independent Media Satellite Channel.

All Rights Reserved

  • x
  • Privacy Policy
  • About Us
  • Contact Us
  • Authors
Android
iOS