Silvergate Capital Corporation, the holding company of crypto-focused Silvergate Bank, announced Wednesday its intention to scale back operations and voluntarily liquidate its banking sector.
The move comes just days after the news shocked the industry with news that Silvergate was facing a financial crisis. One of the few banks that acted as an intermediary in the institutional crypto space, the institution used the bank to transfer client funds following the collapse of his FTX, which he called “Crypto Another victim of ‘winter’.
The bank was founded 30 years ago as a small local lender in California, but in recent years has rapidly grown into a major player in the cryptocurrency industry. Its fortunes also fluctuated with market volatility. Silvergate’s deposits surged from about $2 billion in 2020 to more than $10 billion in 2021 as the token price soared. But by the end of 2022, that deposit had tumbled to his $6.3 billion, down more than 50% from just three months ago.
When FTX collapsed last fall, Silvergate sought to assure investors and regulators that its exposure to the digital asset exchange was limited.
“As of September 30, 2022, Silvergate’s total deposits from all digital asset customers totaled $11.9 billion, of which FTX accounted for less than 10%. No. FTX is not the custodian of Silvergate’s Bitcoin-collateralized SEN leveraged loans.For clarity, our relationship with FTX is limited to deposits,” said Alan Lane, CEO of Silvergate11. I wrote in my statement for the month.
But the government has other eyes. Bloomberg reported in February that prosecutors in the U.S. Department of Justice’s fraud division were investigating Silvergate’s deals with FTX and Alameda Research.
The closure of Silvergate will have a major impact on how we enter and exit the world of cryptocurrencies. On March 3, the bank announced that it would be discontinuing the Silvergate Exchange Network (SEN), a cryptocurrency payment network that allows him to transfer dollars between investors and cryptocurrency exchanges 24/7. . The volatile nature of cryptocurrencies means that few financial institutions are willing to touch them.
Silvergate customers at least seem to be getting their deposits back. The company said in its latest statement:
“In light of recent industry and regulatory developments, Silvergate believes an orderly wind-down of banking operations and voluntary liquidation of banks is the best course of action. We are also evaluating how best to resolve the claim and preserve the residual value of our assets, including our proprietary technology and tax assets.”
