The Federal Home Loan Banks System is lending to digital currency

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The Federal Home Loan Banks System is lending to digital currency

Reports by a report that was released by The Wall Street Journal on January 21, the Federal Home Loan Banks System (FHLB) of the  United States is reportedly lending billions of dollars to two of the largest digital currency banks in an attempt to mitigate the effects of a surge in withdrawals. This move was created in response to the surge in demand for digital currency withdrawals. The Federal Home Loan Bank is a group of 11 different regional banks from all around the  United States that work together to lend money to other financial institutions.

The system, which was established in the midst of the Great Depression to provide assistance for home financing, now has over 6,500 members and 1.1 trillion dollars in assets.

Reports by reports, during the last 3 months of 2022, the organisation extended a loan of about $10 Billion to the commercial bank Signature Bank, making it one of the largest deals involving a bank borrowing money in recent years.

The Signature’s blockchain-based digital platform was given the go-ahead by the New York Department of Financial Services this year 2018.

The study compiled by Silvergate signifies that the average deposits made by digital investment customers during the fourth quarter of 2022 were $7.3 billion. This figure represents a considerable decrease when compared to the amount attained during the third quarter, which was $12 billion.

After the  failure of FTX Trading Ltd, traditional finance has been immune to cryptocurrency contagion; but, reports by the paper, FHLB loans to crypto-exposed institutions can potentially raise that risk.

Senator Elizabeth Warren made the next statement to the WSJ: ” this is why I’ve been warning of the  dangers of allowing cryptocurrency to become intertwined with the banking system.” She argued that taxpayers should not “be left holding the bag for collapses in the cryptocurrency industry,” which she referred to as a market that is full of “fraud, money laundering, and illicit finance.” Senator Warren is a member of the Democratic Party.

The bankruptcy of the FTX Trading Ltd group produced a ripple effect across the digital currency business, which influenced a number of other firms.

The latest event to take place was on January 19, when digital currency lender Genesis filed a petition for protection under Chapter 11 of the Bankruptcy Code. Genesis is informed to have liabilities ranging betwixt $1 Billion and $10 billion.


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