US Congressional Research Finds Perception of Crypto Risk Spurred Bank Withdrawals

Silvergate had more than 90% of deposits coming from crypto clients, while Signature Bank had only 20%, a report found


Source: Shutterstock / Postmodern Studio, modified by Blockworks


The Congressional Research Service found that crypto did have a role to play in the failure of Silvergate, Silicon Valley and Signature Bank, but only an indirect one based on risk perception.

The non-partisan agency, which acts as a trusted resource for members of Congress, published a report on Tuesday, which showed that the banks had limited exposure to high-profile crypto company failures. However, it disclosed that more than 90% of Silvergate’s deposits came from crypto clients.

The financial world truly saw some March Madness when Silvergate announced it would be winding down, Silicon Valley Bank failed suddenly, leaving the investment community reeling, and the smaller Signature Bank, was shuttered by regulators

These banks were the victims of a deposit run, which means too many customers withdrew their funds and the banks couldn’t keep up, but their closure has been blamed on their coziness with the crypto industry — speciously according to congressional testimony.

These were the highlights from the Congressional Research report:

  • Silicon Valley Bank, Silvergate and Signature were all in on the crypto action, providing services to firms in the industry.
  • Among them, Silvergate was king, counting more than 90% of its deposits coming from crypto clients. Meanwhile, Signature Bank had only 20% of deposits in digital assets. SVB claimed to have “minimal exposure,” but Circle’s announcement that it held $3.3 billion of stablecoin reserves at SVB caused a bit of a stir when USDC temporarily depegged from the US dollar.
  • Silvergate offered bitcoin-collateralized loans to industry participants, holding $302 million in bitcoin-collateralized loans at the end of Sept. 2022.
  • Both Silvergate and Signature offered payment networks that facilitate real-time payments among crypto clients
  • Banks had limited exposure to high-profile crypto company failures, including Celsius and FTX.
  • Silvergate had less than 10% exposure to FTX, while Celsius’ deposits at Signature were an inconsequential 0.1%.
  • Crypto firm withdrawals during the bank run were proportional to the banks’ total deposits.
  • The crypto market downturn caused the banks to lose more deposits as centralized crypto platforms and stablecoin issuers experienced redemptions
  • Banks had to sell what they thought were safe and sound investments at a loss to meet withdrawal demand.
  • In conclusion, withdrawals of crypto deposits forced banks to sell other assets at a loss.

The report concluded that the recent failures of crypto-friendly banks have fuelled debate about whether they are managing the liquidity risks of the market well. 

While banking regulators previously clarified that banks were “neither prohibited nor discouraged” from banking crypto, banks may be reticent to bank the industry,” Paul Tierno, analyst in financial economics at the Congressional Research Service wrote. 

“Hesitancy to bank crypto may also highlight broader uncertainty regarding what constitutes appropriate practices in the absence of a more robust regulatory framework.”

Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.

Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.

Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.


upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

The State of LSTFi


There are five broad use cases for LSTs that are gaining traction alongside growth in demand: leverage farming, liquidity providing, LST baskets, stablecoin collateral, and interest rate derivatives.




Web3 real estate investing platform Parcl leverages blockchain to address the current bottlenecks facing property investing


Over 130 family office professionals surveyed noted a 90% client interest in crypto, a finding at odds with Goldman Sachs earlier this month


Newly announced Republican presidential hopeful Ron DeSantis claimed that the crypto industry would be doomed if President Biden is reelected


The 7-day average trading volumes for bitcoin have dropped to their lowest level in two and a half years alongside a muted derivatives market


Alexander Vinnik’s lawyers aim to swap his freedom for detained WSJ reporter Evan Gershkovich


This latest update will introduce immutability to token metadata but ensure that its key characteristics are preserved, and it will also introduce network fees