FHLB is helping the crypto world
According to Protos, the Federal Home Loan Bank (FHLB) faces the task of bailing out several crypto-friendly banks like Silvergate and Signature. It is estimated that these banks received about $15 billion in advances from the FHLB system.
The FHLB system was created after the Great Depression with the goal of providing funds to any housing-related financing member, or to “any community financing system” for small businesses and farms. The FHLB system receives no taxpayer funding, is privately owned, and does not follow most of its initial guidelines.
Currently, though, they describe their goal as “providing liquidity by raising money in the global financial markets and lending that money in the form of ‘advances.'” The system consists of 11 banks across the US, all operating independently. However, it depends Each member over the other members to act as a buffer when defaulting on loans.
FHLB has access to global debt markets and generally maintains high credit ratings, which allows it to make advances, or loans at low interest rates, and to provide dividends to shareholders. To receive an advance from an FHLB, bank, credit union, or financial institution, one must be a member of the system (which has about 7,000 members). The entity must then meet a set of capital requirements set by regulations. Finally, the entity must hold a certain amount of “equity” in the system. You sell the shares for $100 each at a fixed price.
Author: Rafael Mota
Journalist, trader and technology enthusiast since childhood. He was the editor-in-chief of the international journal 21CRYPTOS and founder of Escola do Bitcoin, the first 100% direct education initiative for the decentralized market. He was a speaker at the BlockCrypto conference in 2018.