svb silvergate signature bank usdc

Yesterday, we wrote about how the SVB bank collapse affected the USDC peg. However, there are two more banks that went down over the weekend – Silvergate and Signature. All three banks are also crypto-friendly banks. Is there a pattern? Are other crypto-friendly banks also in danger? 

We take a closer look into what is going on behind the scenes. Is there a coordinated attack against crypto going on?

What Happened to These Crypto-Friendly Banks?

The three banks have one common denominator, bad risk management. In a nutshell, they invested in the wrong assets. In all fairness, not only these three banks, but many banks did. To clarify, they invested in long-dated U.S. government bonds. The banks bought them about two years ago. They still have at least another three years before they mature. At that moment, the banks can cash them in.

Now, we need to point out that two years ago, these bonds seemed a safe investment. The Fed mentioned two years ago that they would not raise interest rates. So, what could possibly go wrong, right? Well, about everything. Long-dated bonds have an inverse reaction to rising interest rates. In other words, if the interest rates go up, the value of the bonds goes down. 

By now, we all know what happened with the interest rates. Due to inflation, the U.S. government did raise the interest rates. See what kind of effect this had on the bonds in the tweet below. It’s an interesting thread to read about SVB’s risk management. Or, rather, the lack of.

Startups, Crypto, and the Three Banks

There’s an intriguing part to this story. It connects startups, crypto, and the three banks. Around 50% of crypto startups and tech companies were clients of these banks. Now that the banks are gone, the crypto startups and tech companies may face financing issues. They will need to find alternative banks that can fill the gap. 

However, that won’t be so easy. The media have painted a picture that this was a crypto problem. That’s not correct, though. The banks had severe bad risk management. The fact that these banks were dealing a lot with crypto startups is irrelevant. So, we all know that crypto has an issue with banking. On the other hand, banking has no issue with crypto.

Nonetheless, under the current situation, this may well have an impact on crypto startups. They are currently without a bank. This can cause all kinds of immediate problems for active projects. Furthermore, overnight, new crypto startups face new challenges. It has become a lot more difficult for them to find a facilitator that can handle their fiat-related activities. This leads us to on- and off-ramping. So, let’s have a closer look at this.

Operation Choke Point 2.0

The original Operation Choke Point dates back to 2013. The Obama administration targeted specific industries. These were companies that were supposedly at high risk for money laundering or fraud. (However, some critics state that some industries were targeted for political reasons.) For example, firearm dealers. Currently, there’s talk of an Operation Choke Point 2.0 that targets the crypto industry.

Nic Carter is a long-time cryptocurrency advocate. He’s also a venture capitalist. In a post dating February 9, 2023, he talks about this operation. He thinks that the Biden administration is quietly targeting the crypto industry. It boils down to the fact that the Biden administration thinks crypto services should have no access to banking services. 

The obvious first target is on- and off-ramping. For example, in December 2022, Silvergate received a letter. The senders: Senators Roger Marshall, Elizabeth Warren, and John Kennedy. As a result, Silvergate’s rival, Signature, dropped 50% of their crypto deposits in December.  

The FDIC, OCC, Feds, and SEC

In January 2023, the FDIC, OCC, and Federal Reserve were in cahoots. They “strongly discouraged” banks to help any crypto companies. This resulted in the Metropolitan Commercial Bank pulling out of crypto all together.

Another sample is the Custodia bank in Wyoming. They wanted to register with the Fed and offer 100% backing of their investments. The Fed denied their request after a two-year process.

This also makes you think about the SEC and Gary Gensler, the chair of the SEC. He calls each cryptocurrency a security. So, strangely enough, we see a pattern in the current government’s plans. It wants to protect the depositors and not the investors or shareholders of these banks. However, last Sunday, the authorities did step in last minute and bailed out all depositors. 

We also saw the collapse of many institutional crypto companies last year. For example, Three Arrows, Terra Luna, and FTX. This wiped out billions of dollars. Many users of these platforms lost everything they had. This resulted in an analytics firm, Elliptic, making a report. They predicted crypto regulations for 2023. So far, they have been spot on.


Yesterday, we reported how the SVB collapse affected the USDC stablecoin price. We saw how the USDC de-pegged. However, the bigger story seems to be that there are two more banks that collapsed. All three banks were crypto friendly. This makes life for crypto startups and crypto companies more difficult in the United States. 

So, is the U.S. government starting a war on crypto? Is there an Operation Choke Point 2.0 under way?

⬆️ For more cryptocurrency news, check out the Altcoin Buzz YouTube channel.

⬆️ Our popular Altcoin Buzz Access group generates tons of alpha for our subscribers. And for a limited time, it’s Free. Click the link and join the conversation today.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.