After the contagion that spread through the markets following the collapses of LUNA, Celsius, FTX, and many other large players, there were concerns that there were many more players who had exposure to the crypto markets and weren’t being open about it.

Now, there are renewed concerns that large banks such as Silvergate may have had exposure to crypto that was too large, which could be hugely problematic for the industry moving forward.

How much exposure does Silvergate have?

Silvergate took pride in being one of the first large banks to offer banking services to cryptocurrency companies, and over the last few years has been extremely profitable in issuing loans to some of the largest players in the industry.

However, 2022 was a terrible year for Silvergate, particularly after the collapse of giants like FTX – there are now rumours that Silvergate could even be functionally insolvent.

Today it was announced that Coinbase are no longer using Silvergate as their banking partner thanks to these concerns over insolvency.

Should authorities be worried?

The question as to whether or not one believes that the government should be worried about the current state of the markets largely depends on one’s perspective as to how much involvement the authorities should reasonably have in the free market.

Unless banks such as the aforementioned are known to have been engaging in financial fraud, there ought be very little reason for the authorities to have too much concern.

When it comes to regulators such as the SEC, whose job it is to protect retail investors, it is a different story – they ought to be extremely cautious about what types of practices are permitted within a particular jurisdiction because the collateral damage of one large party engaging in risky behaviour can be catastrophic.

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