Two crypto-friendly US banks, Signature Bank and Silvergate Capital, have borrowed a total of at least $13.6 billion from the Federal Home Loan (FHL) Banks to deal with a surge in customer withdrawals during the current bear market in digital assets, according to a report by the Wall Street Journal (WSJ).
The FHL Bank System, established by the Federal Home Loan Bank Act of 1932, is a government-backed banking system designed to support mortgage lending and community investment.
The WSJ report states that crypto-friendly Signature Bank borrowed $10 billion from its local FHLBank in Q4 2022, which represents the largest FHL loan by any bank in the past three years.
Signature Bank’s deposits reportedly dropped from nearly $103 billion to less than $89 billion in 2022. Silvergate Capital also borrowed “at least” $3.6 billion, according to the WSJ.
The bank, which became publicly traded in 2019, recently announced it lost $1 billion in the last three months of 2022 alone.
Silvergate specializes in handling digital assets and enables exchanges, institutions, and traders to exchange crypto for fiat currencies.
Despite the challenges in the market, Silvergate stated that it still believes in the potential of cryptocurrencies and is taking steps to navigate the current environment.
Signature, on the other hand, has been reported to be working on reducing its crypto deposit exposure.
