The use of Federal Home Loan Bank advances to offset crypto deposit losses has raised questions about banks’ reliance on the quasi-governmental funding mechanism for liquidity. La Jolla, Calif.-based Silvergate Bank and New York-based Signature Bank, arguably the two traditional banks with the greatest exposure to the digital asset industry, have both tapped Home Loan Bank advances following the collapse of the cryptocurrency exchange FTX. Of the two, Silvergate, which has pivoted the bulk of its operations toward digital assets during the past decade, was more significantly impacted by the volatility in the wake of FTX’s demise. The bank received $4.3 billion in advances from the Federal Home Loan Bank of San Francisco in the fourth quarter of 2022 to offset $8.1 billion of drawn down deposits . Advances now account for more than 60 percent of Silvergate’s wholesale funding.
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