On December 7, 2022, Senators Elizabeth Warren (D-MA) and Tina Smith (D-MN) sent letters to the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), and the Federal Deposit Insurance Corporation (FDIC) expressing concern regarding recent revelation of ties between the banking industry and cryptocurrency firms. The senators seek to better understand the banking industry's exposure to crypto and ask for responses to a variety of questions regarding how each regulator assesses the banking system’s exposure to crypto risks by December 21, 2022.

The letters contain inquiries into how the regulatory agencies assess the risks to banks and the banking system associated with those relationships. The letters come in the wake of the bankruptcy of major cryptocurrency firm FTX Trading Ltd. (FTX), its affiliated crypto fund, Alameda Research LLC (Alameda), and 130 other affiliated companies that recently filed for bankruptcy (see Article, Expert Q&A on the FTX Bankruptcy: What Parties Can Expect).

While acknowledging that the banking system has remained relatively unscathed by the collapse of FTX, Warren and Smith note that "it appears crypto firms may have closer ties to the banking system than previously understood." A report alleges that Alameda made an $11.5 million investment in Washington state-based Moonstone Bank, which was more than double the bank's value at the time and therefore should have raised red flags for regulators. The letters note other banks with crypto ties that have recently come under scrutiny, which raises questions about the safety and soundness of the banking system and highlights potential loopholes that crypto firms may try to exploit to gain further access to banks.

On December 5, 2022, Senators Warren, Roger Marshall (R-KS), and John Kennedy (R-LA) sent a letter to the CEO of Silvergate Capital Corporation (Silvergate) regarding the relationship between Silvergate and FTX. The letter inquires into the bank's relationship with FTX. Reports have emerged regarding a secret transfer of $10 billion of customer funds into Alameda to fund "risky bets" that violated both US securities laws and FTX's terms of service. The reports suggest that Silvergate facilitated the transfer of the FTX customer funds to Alameda.

The letter requests answers to a series of questions regarding whether Silvergate:

The letter requests a response from Silvergate by December 19, 2022.

Update: On January 30, 2023, Senators Warren, Marshall, and Kennedy sent a follow-up letter to the CEO of Silvergate asking for additional information regarding the relationship between Silvergate and FTX to assess the extent to which Silvergate is responsible for the improper transfer of FTX funds and to determine the nature of the compliance failures by Silvergate. The letter requests a response to the questions no later than February 13, 2023.