The Federal Home Loan Banks System lends cryptocurrency

The Federal Home Loan Banks System lends cryptocurrency

According to a report published by the Wall Street Journal on January 21, the United States’ Federal Home Loan Banks System (FHLB) is lending billions of dollars to two of the largest cryptocurrency banks in an effort to mitigate the effects of an increase in withdrawals. This decision was made in response to the surge in demand for cryptocurrency withdrawals. The Federal Home Loan Bank is a group of 11 different regional banks from across the United States that work together to lend money to other financial institutions.

The system, which was set up in the midst of the Great Depression to provide housing finance assistance, now has more than 6,500 members and $1.1 trillion in assets.

According to reports, in the last three months of 2022, the organization provided a loan of approximately $10 billion to commercial bank Signature Bank, making it one of the largest transactions involving a bank borrowing from money in recent years.

Signature’s blockchain-based digital platform received the green light from the New York Department of Financial Services in 2018.

The research compiled by Silvergate indicates that the average deposits made by digital asset customers during the fourth quarter of 2022 was $7.3 billion. This figure represents a considerable decrease from the amount reached during the third quarter, which was $12 billion.

Following the failure of FTX, traditional finance has been immune to crypto-contagion; but, according to the document, FHLB loans to crypto-exposed institutions could increase this risk.

Senator Elizabeth Warren made the following statement to the WSJ: “That’s why I warned of the dangers of allowing crypto to intertwine with the banking system.” She said taxpayers shouldn’t “be left behind by meltdowns in the crypto industry,” which she called a market full of “fraud, money laundering and illicit financing.” Senator Warren is a member of the Democratic Party.

The bankruptcy of the FTX Group produced a ripple effect on the cryptocurrency business, which affected a number of other companies.

The most recent event was on January 19, when cryptocurrency lender Genesis filed for protection under Chapter 11 of the Bankruptcy Code. Genesis is said to have liabilities of between $1 billion and $10 billion.