The collapse of crypto bank Silvergate (SI) and the termination of the Silvergate Exchange Network (SEN) pose a challenge for the crypto industry, JPMorgan (JPM) said in a research report Thursday.

Silvergate had operated as a gateway for more than 1,000 “institutional crypto market participants including major crypto exchanges, miners, stablecoin issuers, market makers and digital asset fund managers that have been using its network to transfer fiat currency between their Silvergate accounts and the accounts of other Silvergate customers,” analysts led by Nikolaos Panigirtzoglou wrote.

Replacing this instantaneous network for processing dollar deposits and withdrawals among crypto market participants will be challenging given the current backdrop and the “general unwillingness of traditional banks to engage with crypto companies following the FTX collapse and given high regulatory pressures,” JPMorgan said.

The report said it is inevitable that at least some of the payment and custody services provided by Silvergate will migrate to other banks such as Signature Bank (SBNY), Provident Bancorp (PVBC), Metropolitan Commercial Bank (MCB)  and Customers Bancorp (CUBI).

(By Will Canny)