U.S. home-loan banks lent billions of dollars to crypto banks: Report

The United States Federal Home Loan Banks System (FHLB) is lending billions of dollars to 2 of the largest cryptocurrency banks successful an effort to mitigate the effects of a surge successful withdrawals, according to a study from The Wall Street Journal connected Jan. 21. 

The FHLB is simply a consortium of 11 determination banks crossed the United States that supply funds to different banks and lenders. Founded during the Great Depression to enactment lodging finance, the strategy has $1.1 trillion successful assets and implicit 6,500 members.

Traditional concern has remained immune to crypto contagion pursuing the illness of FTX, but FHLB loans to crypto-exposed banks could summation that risk, notes the report.

The entity reportedly lent astir $10 cardinal to commercialized slope Signature Bank successful the past 4th of 2022, making it 1 of the largest borrowing transactions by a slope successful caller years. In 2018, the Signature received approval from the Department of Financial Services of New York for its blockchain-based integer platform.

The 2nd slope to requeste funds from the FHLB was Silvergate, receiving astatine slightest $3.6 billion. In the past 4th of 2022, Silvergate experienced important outflows of deposits and took steps to support currency liquidity, including selling indebtedness securities. The nett nonaccomplishment attributable to communal shareholders successful the play summed to $1 billion, Cointelegraph reported.

Related: BIS proposes probe exemplary to survey DeFi’s integration with TradFi and its risks

According to Silvergate's report, the mean integer plus lawsuit deposits successful the 4th fourth of 2022 was $7.3 billion, a importantly little magnitude compared to the anterior 4th erstwhile deposits reached $12 billion.

In comments to WSJ, Senator Elizabeth Warren noted that “this is wherefore I’ve been informing of the dangers of allowing crypto to go intertwined with the banking system," claiming that taxpayers should not "be near holding the container for collapses successful the crypto industry", which she called a marketplace afloat of "fraud, wealth laundering and illicit finance."

FTX's radical illness caused a ripple effect crossed the crypto industry, affecting galore companies. In the astir caller development, crypto lender Genesis filed for Chapter 11 bankruptcy extortion connected Jan. 19, having liabilities estimated betwixt $1 cardinal and $10 billion.