Crypto Banks Are Borrowing Billions From Home Loan Banks To Cover Deficits: WSJ
The crypto industry experienced a major downfall in 2022 as investors lost confidence in digital assets and the sector was plagued by crisis. However, unlike other collapses, it has largely failed to spread to other markets.
Valentin
March 13, 2023
According to a report by The Wall Street Journal on January 21, the United States Federal Home Loan Banks System (FHLB) is providing billions of dollars in loans to two major crypto banks to counteract the impact of an increase in withdrawals.
The FHLB is a group of 11 regional banks across the US that offer funding to other banks and lenders. Established during the Great Depression to help with housing finance, the system has $1.1 trillion in assets and more than 6,500 members.
According to the report, the FHLB reportedly extended a loan of nearly $10 billion to commercial bank Signature Bank in the last quarter of 2022, making it one of the largest borrowing transactions by a bank in recent years. Signature Bank had previously received approval from the New York Department of Financial Services for its blockchain-based digital platform in 2018.
The second bank to receive funds from the FHLB was Silvergate, which received at least $3.6 billion. Silvergate experienced substantial outflows of deposits and took measures to maintain cash liquidity, including selling debt securities in the last quarter of 2022.