US bank Silvergate faced $8 billion in crypto withdrawals.
Customers of the institution, which supplies cryptocurrency services, have removed more than $8 billion worth of assets held by the bank.
In response, Silvergate have hawked over $5.2 billion to make up for the loss.
The move from customers came amid three US regulating bodies warning that financial institutions trading crypto were “highly likely to be inconsistent with safe and sound banking practices”.
Silvergate - which is the New York Stock Exchange - is regulated like other financial institutions, a rarity for some cryptocurrency providers.
Notable examples of failed cryptocurrencies include the fund FTX - who lost their top 50 investors more than $3.1 billion in November - which lost $32 billion in value before its founder Sam Bankman-Fried plead not guilty to counts of fraud, money laundering and other crimes. Federal prosecutors estimate that up to one million investors have lost their money.
The case - which was dubbed as one of the biggest frauds in US financial history - has prompted the entire industry to panic amid a wave of bankruptcies and fall in the value of many cryptocurrencies.
The US Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency said in a joint statement: "The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector.”
They added that crypto was "highly likely to be inconsistent with safe and sound banking practices".
Alan Lane, Silverlight’s CEO explained the bank was hocking its assets to make up the money lost in the withdrawals made "in response to the rapid changes in the digital asset industry".
