US home loan banks lend billions of dollars to crypto banks

Flexystar

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Quote from: bangjoe on January 30, 2023, 06:12:24 AM

Two sizable cryptocurrency banks, namely Silvergate and Signature, borrowed money from the US home loan banks because of the liquidity crisis, especially after the FTX crash, many people withdrew their money. Maybe for Signature and Silvergate there is no other way to increase liquidity power other than borrowing money, otherwise they will be threatened with bankruptcy right in front of them.

What do you think about crypto banks lending money to fiat banks, will this be bad, good, or will nothing happen for the future of crypto?

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Well straight to the face it does sound good for the crypto banks. However, the question is how are crypto banks able to stabilize their asset growing in such volatile market? If high withdrawals started more often from the crypto banks then they will surely have recovery burden. Everything matters, when the money will be returned, what are the interests that are being levied on them, whether the time frame and interest matches the current volatility at all?
Though banks will have these questions covered, then also it's serious one for crypto related assets.

Quote from: avikz on February 01, 2023, 10:14:11 AM

Mortgage banking in US is a very unstable market. So they always keep on finding alternatives to sustain their business. Because with every interest rate increase, they see an increase in their NPA. I am glad that these traditional mortgage banking companies have agreed to lend money into crypto businesses. That's a drastic shift in their ideology.

Even though it's not good as we always want to keep the crypto market separate from the traditional market, I am delighted to see their willingness to support the crypto market during crisis.

Yeah, and that's the failed formula for most of the business. It creates looping interest burden on the borrower. To clear one loan, they need another and another and so on. This only goes until they go bankrupt and nothing else. Many schemes are also liable for failed borrowing in US such as people can skip few EMI's without any late fees or charges thus they are liable for the overburden on the shoulders of banks too.

Pesona1

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Many crypto banks are currently experiencing a surge in withdrawals from customers due to the crisis faced by FTX, what customers do is of course a natural thing considering their fears of a crisis that might also befall that the two banks, but I don't understand why the bank signature and also Silvergate Capital can get loans from Federal Home Loan Banks even though so far the Bank has been a bank that has focused on housing loans?
But whatever is done by signature Bank and Silvergate Capital in my opinion is an anticipation to avoid bankruptcy like what happened to FTX.
Btw previously I have read the news that if previous Signature Bank has released their crypto asset deposits of $10 billion, I think that is possible bad sign for the continuation of crypto banking right now.

avikz

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Mortgage banking in US is a very unstable market. So they always keep on finding alternatives to sustain their business. Because with every interest rate increase, they see an increase in their NPA. I am glad that these traditional mortgage banking companies have agreed to lend money into crypto businesses. That's a drastic shift in their ideology.

Even though it's not good as we always want to keep the crypto market separate from the traditional market, I am delighted to see their willingness to support the crypto market during crisis.

Hydrogen

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Quote from: bangjoe on January 30, 2023, 06:12:24 AM

Two sizable cryptocurrency banks, namely Silvergate and Signature, borrowed money from the US home loan banks because of the liquidity crisis, especially after the FTX crash, many people withdrew their money. Maybe for Signature and Silvergate there is no other way to increase liquidity power other than borrowing money, otherwise they will be threatened with bankruptcy right in front of them.

What do you think about crypto banks lending money to fiat banks, will this be bad, good, or will nothing happen for the future of crypto?

Source

If I remember correctly, US home loan markets recently had record numbers of home mortgages fail.

This could force them to loan money to institutions outside of their normal business model to maintain their bottom line and profit margins. Which could explain how they extended loans to crypto finance ventures, which also may be failing.

Record numbers of real estate loans failing coupled with failing loans extended to crypto finance could converge to stress mortgage based lenders beyond their normal capacity. Which could lead to them needing another bailout in the future. While I don't think it will be as bad as the 2008 subprime mortgage crisis, which was leveraged. I think they could have issues down the road. The eventual fallout and implications are anyone's guess.

Most hope any major change in real estate markets will help home and rent prices to stabilize and become more affordable. But there is so much happening and so many variables in play, its difficult to say for certain what the outcome will be

dansus021

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I just google it I dont know if there is real-world crypto bank but after some searching the CNBC Report - Silvergate Capital shares jump after BlackRock reports an increased stake in the crypto bank. You BlackRock is a behemoth right i think silvergate wont bankrupt soon

I think we need more Crypto banks so who do regular bank services it attract more user to join crypto right?

Die_empty

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Quote from: bangjoe on January 30, 2023, 06:12:24 AM

Two sizable cryptocurrency banks, namely Silvergate and Signature, borrowed money from the US home loan banks because of the liquidity crisis, especially after the FTX crash, many people withdrew their money. Maybe for Signature and Silvergate there is no other way to increase liquidity power other than borrowing money, otherwise they will be threatened with bankruptcy right in front of them.

What do you think about crypto banks lending money to fiat banks, will this be bad, good, or will nothing happen for the future of crypto?

Source

It's not a bad idea for conventional banks to lend to cryptocurrency financial institutions if the terms of the loan are comprehensive and favorable to both parties. The lender must also ensure that these crypto firms are fully registered in the US and not in other freestyle nations like the Bahamas. These borrowers must also prove they have collateral that can serve as viable securities

But the US home loan banks should be aware of the risk involved in lending to crypto banks because just as the fall of some exchanges led to the collapse of other crypto firms if anything negative happens to Signature and Silvergate it would also affect the lender. Genesis, Galaxy digital, Sequoia Capital, Blockfi, etc felt the ripple effect of FTX's fall.

Giving any crypto firm an uncollateralized loan might be counterproductive because of the unpredictability of the market that is why I said the agreement must be comprehensive. They must bear in mind that what is at stake are taxpayers' funds just as Ontario Teachers Pension Plan lost about $95 million in FTX.

Gyfts

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Well, if the crypto banks default on their loans, then that puts these home lender institutions in pretty big trouble. Might finally bring down the housing costs for folks in the U.S.

At this stage, it's within Bitcoin users' interests that these exchanges and crypto enterprises/banks stay operating. Every time a major exchange comes crashing down it sends the entire market downward. Obviously it's not stable for loans to be handed out every time there's liquidity issues. If these places can't maintain liquidity then they shouldn't be trusted with user funds.

jrrsparkles

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Quote from: bangjoe on January 30, 2023, 06:12:24 AM

Two sizable cryptocurrency banks, namely Silvergate and Signature, borrowed money from the US home loan banks because of the liquidity crisis, especially after the FTX crash, many people withdrew their money. Maybe for Signature and Silvergate there is no other way to increase liquidity power other than borrowing money, otherwise they will be threatened with bankruptcy right in front of them.

What do you think about crypto banks lending money to fiat banks, will this be bad, good, or will nothing happen for the future of crypto?

Source

Banks will not give loan even to other banks without the security like something assets or bonds, so this is nothing bad for the lending bank however what if the debt can't be paid, I am not sure what these banks are doing for their revenue but definitely will be on the rough phase so it will be a challenge for them to raise from their debt.

adaseb

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You sure this is correct? I don’t want to click the link and read the article due to malware issues. Can someone quote it here?

The way I understand it is that they had more than enough assets to cover liabilities but they had most of it in US bonds. And these bonds were short dated but they still lost value last year. So they had to sell at a loss to cover any withdraws and they lost $800M as a result but they still remain solvent which is a positive.

romero121

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The crypto banks requires funding to stay strong, maybe some bullish move in the market will relieve pressure from the crypto banks. As in one of the response, it is the two boards that need to have the proper understanding and take measures. Doing so will benefit mutually and the crypto bank here needs to be more responsible. Failing at any point is a big disaster to the entire market. Slowly the market and the traditional system coexistence is getting more around the cryptomarket is a positive move on large scale adoption.

Nwada001

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Every lender has a motive and knows what they are interested in gaining before they agree to give out any amount of loan. I believe that before the loan banks agreed to lend the crypto bank millions to billions of dollars, there may have been some sort of agreement that can serve as collateral if the crypto bank fails to pay back on time, and in most cases like this, the company's reputation and reserves will always be a loan shark's target.
I must admit that the crypto bank's request for a loan to keep its business running by using the fund to provide liquidity while also informing the public that there is enough fund for them to trade with is a brilliant move and a good business strategy.

jackg

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The boards of both must have a fairly good relationship to be able to do this imo. I doubt it's an ordinary agreement (even if the banks that are lending the money are just wanting further exposure to the market).

I think it's a large risk for the banks to invest in cryptocurrency firms given their nature of being unforgiving assets and ones that face issues as mentioned above with ftx (if the crypto bank defaults and holds lots of crypto, it might be easier to steal than physical cash - especially if the cash is held in an account with another bank).

noorman0

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Bad sign for the sustainability of both crypto banks but at least a better option to go bankrupt without leaving the sin (delaying withdrawals indefinitely) to thousands of users. This will narrow the involvement of many parties when they will actually file for bankruptcy eventually.

davis196

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Quote from: bangjoe on January 30, 2023, 06:12:24 AM

Two sizable cryptocurrency banks, namely Silvergate and Signature, borrowed money from the US home loan banks because of the liquidity crisis, especially after the FTX crash, many people withdrew their money. Maybe for Signature and Silvergate there is no other way to increase liquidity power other than borrowing money, otherwise they will be threatened with bankruptcy right in front of them.

What do you think about crypto banks lending money to fiat banks, will this be bad, good, or will nothing happen for the future of crypto?

Source

There's nothing with borrowing money, as long as the borrower is paying his debts on time. I don't mind crypto companies giving loans to fiat companies and vice versa(assuming that everything is legal and there aren't any sketchy financial schemes).
What I don't like is the term "cryptocurrency bank". Bitcoin/crypto is supposed to be anti-bank and the existence of "crypto banks" is against the core concept of Bitcoin and cryptocurrencies in general. I haven't heard anything about those two cryptocurrency banks. Perhaps they are relatively small. I guess that they are getting loans in order to refinance other forms of debt(like paying back money to their depositors).

dothebeats

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If anything, the lenders probably see something on these crypto banks before they authorized that loan. Most of these loans go through a rigorous process before they can be approved, and so they must know that even though these crypto banks have liquidity issues, they still have the weight and asset to pay for whatever they borrowed. Also if whatever they loaned is to provide them liquidity, I don't think there will be any problems arising from that. At least, they are trying to look out for whoever they serve by getting that much needed cash/whatever to gain some liquidity and continue providing service.

bestcoins1

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Quote from: bangjoe on January 30, 2023, 06:12:24 AM

Two sizable cryptocurrency banks, namely Silvergate and Signature, borrowed money from the US home loan banks because of the liquidity crisis, especially after the FTX crash, many people withdrew their money. Maybe for Signature and Silvergate there is no other way to increase liquidity power other than borrowing money, otherwise they will be threatened with bankruptcy right in front of them.

What do you think about crypto banks lending money to fiat banks, will this be bad, good, or will nothing happen for the future of crypto?

Source

I don't think it's a bad thing for crypto banks to do for fiat banks, because if the goal is to help each other so as not to go bankrupt. So obviously there's nothing wrong with that and as for the future of crypto I think it will remain the same, namely experiencing better development because crypto is now being seen by everyone from various sides including the economic side so that this can really help crypto to experience development in the future.

bangjoe

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Two sizable cryptocurrency banks, namely Silvergate and Signature, borrowed money from the US home loan banks because of the liquidity crisis, especially after the FTX crash, many people withdrew their money. Maybe for Signature and Silvergate there is no other way to increase liquidity power other than borrowing money, otherwise they will be threatened with bankruptcy right in front of them.

What do you think about crypto banks lending money to fiat banks, will this be bad, good, or will nothing happen for the future of crypto?

Source

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