The recent collapse of cryptocurrency bank Silvergate Capital Corp (NYSE:SI) and the termination of the Silvergate Exchange Network (SEN) will be a challenging issue for the cryptocurrency industry, according to a report by JPMorgan Chase. 

Silvergate served as a gateway for more than 1,000 institutional crypto market participants to transfer fiat currency between their Silvergate accounts and other Silvergate customers.

Coindesk reported JPMorgan analysts, led by Nikolaos Panigirtzoglou, as saying, "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."

Also Read: Investors' Life Savings At Risk As Binance.US's Acquisition Of Voyager Digital's Assets Faces Regulatory Backlash

JPMorgan's report highlighted it was inevitable for some of the payment and custody services offered by Silvergate to move to other banks such as Signature Bank, Provident Bancorp, Metropolitan Commercial Bank and Customers Bancorp.

However, the note said It was unlikely Signature Bank could entirely replace Silvergate due to market and regulatory pressure to reduce crypto-related risks.

Signature Bank already revealed it planned to reduce its reliance on digital asset client deposits.

The entry of new depository institutions also seemed unlikely due to regulatory scrutiny of cryptocurrency risks.

The report suggested this left few options for institutional crypto investors in the U.S., particularly smaller and less established market participants, who might seek banking services in Europe or other regions.

Read Next: Crypto Fallout Claims Another Banking Victim: How The Industry Is Reacting

Photo: maxtrks28 via Shutterstock