The recent collapse of crypto-friendly bank Silvergate will likely increase regulatory scrutiny on the ties between the crypto industry and the banking sector in the United States.

The collapse of Silvergate, a crypto-friendly bank, will likely significantly impact the crypto ecosystem and its ties with the U.S. banking sector.

Earlier this week, the parent company of Silvergate Bank announced plans to wind down operations and liquidate the bank. The announcement came after the crypto-friendly bank suffered $1 billion worth of losses in the last quarter of 2022 as a consequence of the collapse of crypto exchange FTX, one of Silvergate’s leading clients.

Silvergate was one of the few regulated financial institutions providing banking services to crypto companies and exchanges. Its downfall will likely reinforce U.S. regulators’ arguments that crypto threatens the traditional financial system.

Earlier this year, U.S. banking regulators issued a statement warning banks about the risks of serving crypto-related companies.

But crypto industry leaders spoke out against this assessment, pointing out that the crash of Silvergate was more a cause of classic banking risk than its exposure to crypto assets.

As Caitlin Long, founder and CEO of Custodia Bank, explained, Silvergate would have survived the bank run without impairing its capitalization if it had held enough cash in its deposits to meet customers’ withdrawal requests.

To learn more about the causes and consequences of the Silvergate meltdown, check out Cointelegraph’s latest video report on YouTube — and don’t forget to subscribe!