Fri, September 20, 2024 at 06:39

• 

  Kang-hoon

  • Hello, Annie.

  • Today, I have some significant news regarding the recent bankruptcy of Silvergate Bank and its connection to the Federal Reserve's actions.

  • 
• Annie

  • Oh, really?

  • What happened to Silvergate Bank?😮

  
• 

  Kang-hoon

  • Earlier this week, Silvergate Bank filed for Chapter 11 bankruptcy.

  • This was largely due to the Federal Reserve's involvement in what is being called Operation Choke Point 2.0.

• Annie

  • Operation Choke Point 2.0?

  • That sounds serious.

  • What exactly is it?

  
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• 

  Kang-hoon

  • Operation Choke Point 2.0 is a coordinated effort by the Biden administration's top financial regulators, including the Fed, FDIC, and OCC, to crack down on banks that serve the crypto space.

  • This operation targeted Silvergate and Signature banks.

• Annie

  • Wow, so they specifically went after crypto-friendly banks?😲

  
• 

  Kang-hoon

  • Yes, exactly.

  • According to Nic Carter, a well-known crypto evangelist, the Federal Reserve played a crucial role in pushing Silvergate Bank towards bankruptcy by imposing severe restrictions on its crypto-related deposits.

• Annie

  • What kind of restrictions did they impose?

  
• 

  Kang-hoon

  • The Fed directed Silvergate to reduce its crypto-related deposits to less than 15% of its business.

  • This drastic reduction made it difficult for the bank to sustain its operations.

• Annie

  • That sounds harsh.

  • Did Silvergate have any other issues?

  
• 

  Kang-hoon

  • While Silvergate did face significant redemptions following the FTX collapse, it remained solvent.

  • However, the regulatory pressure from the Fed ultimately led to its downfall.

• Annie

  • So, it wasn't market losses that caused the bankruptcy?

  
• 

  Kang-hoon

  • Correct.

  • Nic Carter rejects the notion that market losses were to blame.

  • He asserts that Silvergate was essentially 'murdered' by the regulatory crackdown, not 'suicided' by market conditions.

• Annie

  • That's a strong statement.

  • Did anyone else support Carter's claims?

  
• 

  Kang-hoon

  • Yes, a former Silvergate executive, Elaine Hetric, confirmed Carter's observations.

  • She stated that the regulatory mandate to reduce crypto exposure forced the bank to shut down.

• Annie

  • Did they mention any broader regulatory efforts?

  
• 

  Kang-hoon

  • Indeed.

  • Hetric's affidavit also pointed out broader regulatory efforts, including the exclusion of crypto-related business lines from bank acquisitions.

  • This further supports Carter's claims.

• Annie

  • What about legal actions?

  • Is anyone challenging these regulations?

  
• 

  Kang-hoon

  • Yes, the law firm Cooper and Kirk, which sued over Operation Choke Point 1.0 under Obama, has pointed out that Operation Choke Point 2.0 violates the Fifth Amendment.

  • Coinbase CLO Paul Grewal also criticized the regulators for their high-handedness in crypto regulations.

• Annie

  • So, what does this mean for the crypto market and investors like me?🤔

  
• 

  Kang-hoon

  • Unfortunately, this news is a negative development for the crypto market.

  • 

  • The regulatory crackdown on crypto-friendly banks like Silvergate creates an uncertain and hostile environment for crypto businesses and investors.

• Annie

  • That's disappointing to hear.

  • Thank you for the detailed explanation, Kang-hoon.🙏

  
• 

  Kang-hoon

  • You're welcome, Annie.

  • It's crucial to stay informed about such developments to make well-informed investment decisions.

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.