Crypto Regulation Concerns for Silvergate Capital May Be Overblown Right Now

Following the Basel Committee on Banking Supervision's (BCBS) proposal on June 10 for regulating crypto assets at banks, Silvergate Capital (NYSE: SI) saw its shares drop nearly 10% over the next two days. Investors seemed concerned that the regulation, which would essentially require banks to hold much larger amounts of capital to back up certain crypto assets on their books, might hamstring Silvergate's growth. However, while the BCBS proposal is still preliminary, I believe these regulatory concerns may be overblown. Here's why.

Silvergate Capital specializes in banking crypto traders and exchanges. The main way it does this is through its proprietary Silvergate Exchange Network (SEN), a real-time payments network that can clear transactions in U.S. dollars instantly between two users in the network. This is ideal for institutional crypto traders and crypto exchanges, because cryptocurrencies trade around the clock.

BCBS, which essentially creates the framework for most banking regulation around the world, recently issued a proposal that would call for banks to hold a lot of capital for the volatile crypto assets they acquire, including bitcoin (CRYPTO: BTC).

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Source Fool.com