JP Morgan: Crypto market participants becoming more reliant on stablecoins following Silvergate Bank closure

JP Morgan (JPM) released a research report Wednesday which suggested that it will take time for new banking networks to fill the void left by Silvergate Bank, Silicon Valley Bank, and Signature Bank in the U.S.. In the meantime, crypto market participants and investors appear to have turned more towards stablecoins to move money around. Stablecoins are a type of cryptocurrency whose value is tied to an underlying asset, usually the U.S. dollar. The report found that after Silvergate announced its voluntary liquidation and winding down operations on March 8th, trading volumes for stablecoins such as tether (USDT) have substantially increased in market share.

JP Morgan has suggested that the collapse of the three banks may have affected crypto firms in different ways; those with diversified banking partners are deemed to be less affected. The investment bank has further indicated that this could present an opportunity for some exchanges to gain market share by providing banking services to crypto-native firms and investors. In the long term, it is imperative for the crypto ecosystem to replace the lost banking networks in order to facilitate efficient and secure fiat currency transfers between market participants, while also stabilizing stablecoin universes.

The tougher U.S. regulatory stance could compel crypto market participants to shift their operations to banking networks in Europe and Asia, according to the report.