U.S. home-loan banks lent billions of dollars to crypto banks: Report
The FHLB is lending billions of dollars to two of the largest crypto banks to counter the effects of a withdrawal surge.

The United States Federal Home Loan Banks System (FHLB) is lending billions of dollars to two of the largest cryptocurrency banks in an effort to mitigate the effects of a surge in withdrawals, according to a report from The Wall Street Journal on Jan. 21.

The FHLB is a consortium of 11 regional banks across the United States that provide funds to other banks and lenders. Founded during the Great Depression to support housing finance, the system has $1.1 trillion in assets and over 6,500 members.

The entity reportedly lent nearly $10 billion to commercial bank Signature Bank in the last quarter of 2022, making it one of the largest borrowing transactions by a bank in recent years. In 2018, Signature received approval from the Department of Financial Services of New York for its blockchain-based digital platform.

The second bank to request funds from the FHLB was Silvergate, receiving at least $3.6 billion. In the last quarter of 2022, Silvergate experienced significant outflows of deposits and took steps to maintain cash liquidity, including selling debt securities. The net loss attributable to common shareholders in the period summed to $1 billion, Cointelegraph reported.

According to Silvergate’s report, digital asset customer deposits in the fourth quarter of 2022 were $7.3 billion, a significantly lower amount compared to the prior quarter when deposits reached $12 billion.

Traditional finance has remained immune to crypto contagion following the collapse of FTX, but FHLB loans to crypto-exposed banks could increase that risk, notes the report.

In comments to WSJ, Senator Elizabeth Warren saidthat “this is why I’ve been warning of the dangers of allowing crypto to become intertwined with the banking system,” claiming that taxpayers should not “be left holding the bag for collapses in the crypto industry,” which she called full of “fraud, money laundering and illicit finance.”

FTX’s group collapse caused a ripple effect across the crypto industry, affecting many companies. In the most recent development, crypto lender Genesis filed for Chapter 11 bankruptcy protection on Jan. 19, having liabilities estimated between $1 billion and $10 billion.

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Central African Republic eyes legal framework for crypto adoption
CAR President Touadéra believed in creating a business-friendly environment supported by a legal framework for cryptocurrency usage.

Central African Republic (CAR), a developing country in Central Africa, set up a 15-member committee responsible for drafting a bill on the use of cryptocurrencies and tokenization in the region.

According to Faustin-Archange Touadéra, the president of CAR, cryptocurrencies can potentially help eradicate the country’s financial barriers. He believed in creating a business-friendly environment supported by a legal framework for cryptocurrency usage. A rough translation of the official press release reads:

“With access to cryptocurrencies, the monetary barriers existing until now will disappear, the main objective of the measures adopted by the government being the development of the national economy.”

The committee responsible for drafting the crypto bill comprises 15 experts from five ministries of CAR — Ministry of Mines and Geology, Ministry of Waters, Forest, Hunting and Fishing, Ministry of Agriculture ad Rural Development, Ministry of Town Planning, Land Reform, Towns and Housing and Ministry of Justice, Promotion of Human Rights and Good Governance.

Through collaboration, the members are tasked with working on a legal framework that will allow cryptocurrencies to operate in Central African Republic and expedite the development of the national economy.

Crypto initiatives from the African continent marked another milestone as Nigerian crypto exchange Roqqu bagged a virtual currency license for the European Economic Area after two years of waiting for permission from regulatory authorities.

Roqqu CEO Benjamin Onomor told Cointelegraph that off-shore Africans send back over $5 billion to their relatives, and the current remittance system slows the process.

“It makes a lot of sense to solve this problem by using crypto as the vehicle. Crypto is a faster and cheaper route that can bridge the gap and help reduce fees in moving money globally. This is the core of the problem we want to solve,” he added.

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FTX VCs liable to ‘serious questions’ around due diligence — CFTC Commissioner
Romero raised concerns about FTX CEO John Ray’s revelations in court about not having any records and controls over the exchange’s financials.

Amid ongoing investigations around the defunct crypto exchange FTX, the Commodity Futures Trading Commission (CFTC) questions the due diligence conducted by institutional investors and their accountability regarding the loss of users’ funds.

CFTC Commissioner Christy Goldsmith Romero stated that VCs that had to write down their investments in millions of dollars to nearly zero raises “serious questions” about the due diligence conducted over the last year, speaking to Bloomberg.

She raised concerns about FTX CEO John Ray’s revelations in court about not having any records and controls over the exchange’s financials.

The lack of recordkeeping coupled with “an auditor no one’s ever heard of” forces the CFTC to ask questions about the mindset of the institutional investors. In this regard, Romero asked a series of questions:

“How is that possible? So do they turn a blind eye to it? Were they just distracted by this promise of innovation?”

FTX founder and former CEO Sam Bankman-Fried used trust as a marketing technique to gain investor confidence. However, Romero echoed the current investor sentiment while stating that “We know now that that's not true.”

As a result, she believed that the VCs backing FTX ignored the red flags when it came to due diligence, further questioning their involvement.

“So was there some conflicts that prevented them (VC backers) from really paying attention to the due diligence and the facts that they were uncovering?” asked Romero while concluding the topic at hand.

Shark Tank star and investor Kevin O’Leary, who once supported FTX, warned against the possible fall of unregulated crypto exchanges. He stated:

“If you’re asking me if there’s going to be another meltdown to zero? Absolutely. One hundred percent it’ll happen, and it’ll keep happening over, and over and over again.”

As Cointelegraph previously reported, based on a report by the National Bureau of Economic Research, up to 70% of the trading volume on unregulated exchanges is wash trading.

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This Daily Dose was brought to you by Cointelegraph.

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