Cryptocurrency investors find having a bank account indispensable, given the prevalent use of cards for payments in traditional transactions. As such, crypto enterprises must forge partnerships with banks, though the willingness of banks to collaborate remains below expectations, a constraint that was more pronounced in the past.
A recent Bloomberg report disclosed that the SEC has initiated legal action against the now-defunct Silvergate Bank for alleged securities fraud in federal court. Silvergate, known for its extensive dealings with crypto firms, faced a bank run and eventual bankruptcy during last year’s series of chain bankruptcies. The implications of this lawsuit on the crypto sector remain uncertain.
Some U.S. politicians attributed the bank’s collapse to crypto market volatility. Conversely, unrelated banks also struggled, failing to meet bond discount obligations amidst the Federal Reserve’s swift interest rate hikes. In response, the Fed intervened by injecting liquidity into the banking system to forestall further bankruptcies.
Silvergate Bank shuttered its operations on March 12, 2023, coinciding with the collapse of three other crypto-friendly banks and a notable downturn in crypto markets. Speculation is rife that if the SEC’s investigation reveals connections to collaborating crypto companies, Bitcoin prices could decline. However, prevailing expectations suggest the lawsuit primarily concerns the bank itself, distinct from its crypto partners.
In conclusion, while these developments might briefly dampen market sentiment, a clarification that the lawsuit does not significantly involve the crypto sector could potentially reverse Bitcoin’s recent declines. At present, Bitcoin has seen a modest downturn. It’s worth noting that the lawsuit’s outcome could swing in either direction concerning its relevance to crypto.
Update: The lawsuit pertains to the bank’s role during the FTX collapse. Although executives are accused, details in the complaint remain sparse.
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Disclaimer: This article does not constitute investment advice. Investors should acknowledge the high volatility and risks associated with cryptocurrencies and conduct thorough research.
