Banks are the foundation of a country's economic system, and all bank failures are disturbing. There were two unsuccessful times last week. On March 8th, Silvergate Capital, a banking company dedicated to digital currency, entered into self-settlement. On March 10, US regulators shut down and took deposits from Silicon Valley banks facing the high-tech industry, in what has been called the second largest bank failure in US history. These California organizations are all victims of bank deposits crowding out.

The collapse of Silicon Valley Bank (SVB) could be very damaging, although it is too early to draw conclusions. Stable credit coins such as USDC and Dai have lost the rates associated with the dollar. This has never been a good luck, but they were repaired before Sunday, March 12. However, the collapse of Silvergate Bank is unlikely to cause long-term harm to the password field.

Insiders told Cointelegraph that compared with the earthquake caused by the collapse of FTX in November 2022, the failure of the company's San Diego-based Confederate Reserve Bank should be a primary and secondary matter. The implosion of FTX destroyed dozens of password companies, including Bank of Silvergate. By comparison, the impact of bank settlement will be more manipulated. It may even give some successful experience of diversification-a basic rule of risk management that seems to have been forgotten when the market soared.

This could have a short-term adverse impact and could make it increasingly confusing and expensive for password companies to explore banking services in the United States. And it is not just the United States that has seen some unrest.

In South America, the key is a data encrypted foreign exchange trading (FX) sales market, with many companies buying smooth credit currencies such as USDC and Tether (USDT) as a way to ship assets abroad. "the aftermath of the Silvergate incident is wrong," CEO Mhita Liang Cesar of Transfero Group, a Fiat car on-ramp service provider, told Cointelegraph.

"most password trading centers lose their dollar tracks. [...] It seriously affects the replacement of the foreign exchange market by password-driven LATAM. According to Cesar, local agents in Mexico for USDT and USDC are suddenly unable to fill inventory. (the interview for this article will be conducted before the seizure of SVB, which has further seriously affected some relatively stable enterprises.)

Josh Olszewicz, head of exploration at Valkyrie Digital Asset Management, told Cointelegraph: "users and companies communicating with data encryption lack access ramps and widespread bank requirements, which can be easily blocked in a short period of time." Companies such as Coinbase, Paxos, Gemini, Bitstamp and Galaxy Digital also use Yinmen as a banking partner.

Nevertheless, the bankruptcy of Yinmen Capital may not create a long-term hindrance. Olszewicz added: "from the source, it is not easy for a bank to withdraw from the password field to harm all blockchain technologies, including BTC."

What lessons have been learned?

Franz Sylvia (Joseph Silvia), a partner at the law firm Dickinson Wright and a former legal adviser to the Federal Reserve Bank of New York (Federal Reserve Bank Of Chicago), sees the bank's settlement more as a "warning story" than as a sign of a more difficult time in the cryptographic field. The bank's projects are not diversified enough, and deposits depend on the password field. Similarly, Silicon Valley Bank of America can say that it is over-committed to venture capital firms that focus on technological innovation. In both cases, the surge of customer deposits quickly turned into a storm.

More than 90 per cent of Silvergate deposits come from password-related companies, which were collected by busy investors after the collapse of FTX in November last year, in the most typical bank crowding out. The activity has not gone unnoticed by US banking regulators. The Federal Reserve meeting and the Office of the Superintendent of Monetary Engineering issued a joint declaration in February warning banking institutions of the "interest rate risk" caused by the "vulnerability of the market for the sale of data encrypted assets".

Silvia said that after the Silvergate settlement, some traditional banks may now completely close the gates of data encrypted accounts, but other banks may strictly control the acceptance of data encrypted deposits. This will increase the cost of American password companies, as its bank selection becomes more and more limited.

Apart from being overcommitted to a single high-risk industry, Silvergate assets are likely to invest in incorrect assets. As Austin Novak, an adjunct professor at Columbia University's School of International Business and managing partner of Zero Knowledge Consulting, told Cointelegraph: "fundamentally, if you hold long-term assets, because you don't easily overcome crowding out and have to diversify, you either want a relatively highly diversified deposit base, or if you concentrate, you should have a much shorter holding period." This makes it very easy to settle accounts in the event of a large-scale withdrawal. " Novak added:

SilverGate is focused and has long-term securities. You can't have both. You have to pick one. If they did not increase the holding period of assets, there would be no problem for them to be so centralized.

Novak believes that the collapse of Silvergate will not do as much harm to the cryptographic industry as the collapse of FTX-or even the wider banking sector. By the end of 2022, Silvergate had total assets of $11.4 billion, which is also a medium-sized asset by American banking norms.

By comparison, JPMorgan's year-end income statement has assets of $366 million, more than 300 times that of the latter. SVB, with $209 billion in assets, is somewhere in between. Novak said that from a popular banking point of view, SilverGate is "a concept of a glitch", he continued:

"FTX is a problem for passwords, not just because of the total, but also because of the surprising extent of fraud and mismanagement. Yinmen seems to have just made a mismatch between assets and liabilities, which is also a long-standing problem in the banking industry. That doesn't mean the CEO stole billions of dollars from users.

"FTX is a much more serious problem," says Justin Dennison, director of institutional marketing at Amber Group, a Malaysian data asset company. D'Anethan added: "thousands of physical lines have won loans to FTX the Exchange or Alameda the Fund for assets, buying and selling, escrow and return on investment. This affects the entire password interior space.

D'Anethan added that SilverGate has the potential to have an impact in the United States, "but it still leaves a lot of alternatives and alternatives for password companies, if anything, to promote more decentralized passwords." For a short time, "other password-friendly banks such as BCB, Prime Trust, Seba" give channel / import / exit and foreign exchange transaction changes. "of course, for fashion or organizational selection, you really need the legal track and new capital to enter the password sales market. However, in this period of time, there is nothing for me to think that we will also lack this thing.

Others also say that US regulators are determined to scare off traditional banks and forbid them to do business with cryptocurrency exchanges. Will this also cause password companies to move out of the United States and customers will conduct peer-to-peer transactions, as China has recently said?

"I think many companies headquartered in the United States already have or are looking for foreign solutions. This will benefit jurisdictions that are more password-friendly. I was thinking about the United Arab Emirates, Malaysia, Hong Kong, China, and maybe the United States or Germany and Switzerland.

Compared with retailing, the situation would be more complicated if it were headquartered in the United States. Ironically, in order to protect retail investors, regulators may prevent them from entering the industry-if history is any guide-the industry is growing rapidly and being adopted internationally.

Valkyrie's Olszewicz even saw a proactive conclusion if the United States thus obtained scientific and reasonable password control. "potentially, as data asset trading centres are subject to more and more strict regulation, larger traditional banks are likely to become more and more keen to connect with banks in the field of digital assets. If not, that is right, more companies and capital will be transferred abroad, because the data encryption for a short period of time do not want to go anywhere.

Mr Novak of the Australian International Business School says: "I think there is no doubt that the long-term harm is the transfer of bank linkages elsewhere, which becomes more diverse and resilient in proactive situations." But US regulators are moving in the opposite direction, and as an example, passwords are a problem-- no, awkward risk controls are-- so it will also drive passwords to create stronger bank connections in Asia and Europe, especially in the post-biotite [data encrypted asset sales market] era.

Just growing troubles?

Sylvia of Dickinson Wright shows that it would be helpful to have more control clarity for digital currency and blockchain applications. In one case, US regulators are likely to become more established in his advisory announcements-warning banks, for example, that if they accept data-encrypted deposits, the total should not exceed 5 per cent of total liabilities. In addition, data-encrypted deposits are still an interest rate risk, Sylvia adds. "they are not as sticky as traditional deposits."

Some American password companies may also need to find new banks, and traditional banks may be more hesitant to accept password-related deposits-at least at this stage. But there will be no trend in the nascent field of cryptography, Sylvia added, adding that she sees the unrest at this stage as a growing worry. At this stage, it may be necessary to replace some embarrassing artists. Even so, she told Cointelegraph that the password unit was still an "interesting target group".