Financial authorities have found a good way to slowly kill the cryptocurrency market - by blocking all ways of fiat money entering the crypto market.
According to RBK, dollars are gradually leaving the cryptocurrency market. The American bank, Silvergate, is forced to roll back payment services for the crypto business and suffer multimillion-dollar losses.
American Silvergate has created an image of a crypto-friendly bank, which is probably the main reason for its problems. The bank's reputation was hit by its work with bankrupt FTX and its related fund, Alameda Research, and the decline of the cryptocurrency market affected its capitalization. Over the last six months, its shares have fallen by almost 95%.
The bank suffered a loss of $949 million in 2022.
On March 1, Silvergate announced that it would postpone the submission of its annual financial report to the US Securities and Exchange Commission (SEC) for two weeks, as it was forced to re-evaluate its ability to continue its activities, and its losses for the past year may increase further. After the bank postponed its report to the SEC, major players in the crypto business announced the termination of their cooperation with it. Among them are Coinbase, Gemini, and Crypto.com, issuers of stablecoins Paxos and Circle, and Galaxy Digital.
The Federal Deposit Insurance Corporation (FDIC) may take over Silvergate soon, starting the search for a potential buyer for the bank or its deposits, and according to rumors, Wells Fargo may become its buyer.
For the crypto business, banking services, particularly in the United States, are becoming increasingly limited. Earlier, the CEO of Binance, Changpeng Zhao, said that, according to his information, American banks have an informal recommendation to either avoid working with the crypto market as much as possible or to be extremely cautious when doing so. The example of Silvergate is likely to be indicative for others as well.
The CEO of the British processing company BCB Group, Oliver von Landsberg-Sadie, has announced his readiness to take a niche in working with dollars for clients from the crypto sphere. His company's solutions are similar to Silvergate's SEN service, and it is known for being the first cryptocurrency company to obtain a license from the UK regulator, the Financial Conduct Authority (FCA). BCB provides services for converting pounds, euros, Swiss francs, and yen into cryptocurrencies in Europe, and already works with Bitstamp, Galaxy Digital, Gemini, and Kraken.
Kraken, in turn, has revealed plans to quickly open its own bank, as reported by Marco Santori, the exchange's chief legal officer, during a podcast with The Block. He also stated that the bank problems of Silvergate did not affect the exchange.
In the near future, P2P exchanges will be the only way to exchange fiat currencies for cryptocurrencies. Moreover, the largest of them, such as the P2P platform of the Binance exchange, may stop operating under regulatory pressure. Others will simply be liquidated, like LocalBitcoins.
It might seem that such pressure is an ideal way to put an end to cryptocurrencies as an alternative to the upcoming introduction of CBDC. However, it could be the case that people will not convert their crypto into fiat, but instead will use it to pay for necessary goods and services. And when they need to acquire cryptocurrencies, they will simply sell something directly for crypto, bypassing fiat.
As a result, cryptocurrencies will become not just a dangerous competitor to central bank digital currencies, but a full-fledged replacement for CBDCs.