Crypto Winter sends deposits crashing

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This year, the crypto winter has started to impact banks that deal in digital assets.

This is according to a recent report from S&P Global, which stated that these banks have seen an increase in crypto-related deposit outflows.

The fluctuation is likely to continue, given the volatility in the asset class resulting from the fallout from FTX Trading Ltd., according to the report.

For example, Silvergate Capital has seen its crypto deposits fluctuate by more than $5 billion in a given quarter twice in 2022, due to bitcoin’s spike and the collapse of stablecoins Luna and TerraUSD.

The report says Metropolitan Bank Holding Corp. saw its cryptocurrency-related deposits fall nearly 40% sequentially in the third quarter.

Meanwhile, Signature Bank and Silvergate, which S&P describes as two of the largest cryptocurrency banks by deposit size, saw quarter-over-quarter declines of 8.9% and 10.8%, respectively. .

Earlier this month, Signature Bank appeared to be distancing itself from the crypto industry after previously courting the sector, reducing customer deposits to less than 15%.

We’re not just a crypto bank, and we want to make that crystal clear, Signature Bank COO Eric Howell told an industry conference.

To make its case, the bank is going to exit about $8 billion to $10 billion in deposits in this space, which we can easily cover with cash and borrowings, Howell added.

This month, Alan Lane, CEO of Silvergate Capital, also wrote to the Securities and Exchange Commission (SEC) to say that his company had performed extensive due diligence on FTX, its affiliate trading platform Alameda Research and others. FTX-related companies.

As PYMNTS wrote in our crypto-winter postmortem last week, it’s worth remembering that the failures of the crypto sector weren’t caused by issues with the blockchain technology that underpins the industry.

In fact, many industry watchers, and especially purists, would tell you that the failures were directly at odds with the promise and premise of blockchain technology, we wrote.

Additionally, technical development within the native Web3 architecture has progressed rapidly, with Ethereum shifting from the proof-of-work model to the proof-of-stake blockchain model, an exponentially more sustainable method based on power consumption. The improvement, a monumental technological feat no matter what one thinks of the industry, can be seen as a singularly positive event.

Today, the future of crypto as an asset class remains more uncertain than ever as attention has shifted to the spiraling cycle of new contagion impacts, bankruptcy and recovery proceedings, regulatory investigations and potential legislative fixes after the fact, we wrote.

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How consumers pay online with stored credentials Convenience drives some consumers to store their payment credentials with merchants, while security concerns give other customers pause. For How We Pay Digitally: Stored Credentials Edition, a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 US consumers to analyze the consumer dilemma and reveal how merchants can overcome holdouts.

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