JPMorgan Chase: The collapse of Silvergate and the closure of SEN network bring challenges to the encryption industry

It is reported that JPMorgan said in a research report on Thursday that the collapse of the encryption bank Silvergate and the closure of the Silvergate Exchange Network (SEN) posed a challenge to the encryption industry. JPMorgan Chase said that in view of the current background and “after the collapse of FTX, traditional banks are generally reluctant to cooperate with cryptocurrency companies and are facing huge regulatory pressure”, it would be challenging to replace the SEN that handles dollar deposits and withdrawals between cryptocurrency market participants.

Interpretation of this information:

JPMorgan recently released a research report stating that the collapse of Silvergate Bank and its digital currency platform, the Silvergate Exchange Network (SEN), has posed a challenge to the cryptocurrency industry. The bank believes that the current market background, coupled with the reluctance of traditional banks to cooperate with cryptocurrency companies following the collapse of FTX, means that finding a replacement for SEN, which facilitated dollar transactions between cryptocurrency market participants, will prove extremely difficult.

The collapse of Silvergate Bank has undoubtedly caused a setback in the cryptocurrency industry. The bank, which had made a name for itself as a leader in crypto lending, deposits and withdrawals, and exchanges, had partnered with several cryptocurrencies, including Litecoin and Ethereum, offering them banking services. The bank’s collapse is, therefore, a major blow to the industry.

Following the collapse of FTX, which exposed the vulnerability of cryptocurrency companies to regulatory scrutiny, traditional banks, which had initially shown some interest in the sector, began to pull back as they tried to cope with the regulatory risks associated with cryptocurrency investments. This has, in turn, posed a challenge for the cryptocurrencies relying on traditional banks to facilitate their transactions.

According to JPMorgan Chase, replacing SEN, which was critical in facilitating dollar transactions between cryptocurrency participants, will prove immensely challenging. The bank notes that it will be nearly impossible to find another bank with the same degree of enthusiasm and aggressiveness as Silvergate. Also, given the regulatory scrutiny that the cryptocurrency industry is under, traditional banks are wary of partnering with cryptocurrency companies, making the problem even more complex.

In conclusion, the collapse of Silvergate has exposed the vulnerabilities of the cryptocurrency industry and underscores the risks associated with digital currency transactions. Furthermore, the reluctance of traditional banks to cooperate with cryptocurrency companies has dealt a significant blow to the industry, posing a challenge that will require innovative approaches to overcome.