Morgan Stanley: Inflows of digital assets will slow without on-ramps between fiat and crypto

Despite the closure of crypto-friendly bank Silvergate, the focus will be on actions by Signature Bank and Binance, the report said.

The U.S. regulators may be stepping up their actions against banks that provide services to crypto companies, Morgan Stanley (MS) reported Wednesday.

Crypto-friendly bank Silvergate (SI) shut down, citing industry and regulatory developments, a U.S. on-ramp for converting fiat currency into crypto, and regulatory action might close other avenues as well.

Regulators are taking coordinated action to highlight the risks associated with American banks providing crypto services, according to Morgan Stanley. Banks should consider liquidity risks related to cryptocurrencies in a statement issued recently by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).

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According to Morgan Stanley (MS), U.S. regulators may increase their enforcement actions against banks that provide services to crypto companies.

Crypto-friendly bank Silvergate (SI) shut down its crypto conversion on-ramp in the United States, citing industry and regulatory developments, and regulatory action might close other avenues as well.

A coordinated action by regulators to highlight the risks associated with American banks offering crypto services has been noted by Morgan Stanley. In a recent statement, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) warned banks about crypto-related liquidity risks.

Sheena Shah and Kinji C. Steimetz wrote that flows into the crypto sector will slow without on-ramps between fiat and crypto.

Providing crypto services to crypto exchanges, Silvergate has been at the center of the cryptocurrency industry’s growth, the analysts noted. After Silvergate announced that it was evaluating its ability to continue as a going concern, and that it was being investigated by regulators, Congressional inquiries, and the U.S. Department of Justice, its shares fell 58% on March 2.

According to the note, the cryptocurrency market will now focus on the activities of rival crypto bank Signature (SBNY), Binance, and any additional regulatory actions related to specific companies or products.

During the time of publication, Bitcoin (BTC) was trading around $21,700, below a key technical support level of $22,200.