Silvergate Capital Corporation announced it would close and voluntarily liquidate the bank only days after surprising Wall Street with its serious financial crisis.
Silvergate Bank's parent company, Silvergate Capital Corporation, stated that it would be closing and voluntarily liquidating the bank.
According to TechCrunch, this decision was announced Wednesday, Mar. 8, only a few days after Silvergate surprised Wall Street with the severe financial crisis it is experiencing.
"In light of recent industry and regulatory developments, Silvergate believes that an orderly [wind-down] of Bank operations and a voluntary liquidation of the Bank is the best path forward. The Bank's [wind-down] and liquidation plan includes full repayment of all deposits. The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets," the crypto bank stated.
The Crypto Market
The company started out 30 years ago as an independent California lender, but it has since grown into a major participant in the cryptocurrency market. The company's profits increased and plummeted with market fluctuations.
When the price of tokens skyrocketed in 2021, the amount of money deposited at Silvergate increased from around $2 billion in 2020 to more than $10 billion. Deposits dropped to $6.3 billion by year's end of 2022, down more than 50% from the previous year.
With the collapse of FTX, which relied on the bank to move client cash, Silvergate became one of the few that served as a gateway in the domain of institutional crypto. Nevertheless, the firm assured investors and authorities that it had little exposure to the FTX digital assets exchange at its demise last year.
Also Read: CryptoWatch: Deepfake and Phishing Scams Run Amok, the Latest Prices of the Coins
Association With FTX
As of September 30, 2022, the total deposits from all digital asset users at Silvergate amounted to $11.9 billion, with FTX making up less than 10% of that total.
While Silvergate's SEN Leverage loans are collateralized by bitcoin, FTX is neither a lender nor an investor in Silvergate. "Our relationship with FTX is limited to deposits," Silvergate CEO Alan Lane assured it in a statement made in November 2022.
Silvergate Exchange Network or SEN is a cryptocurrency payments grid that allows 24/7 US dollar transactions between investors and crypto firms.
On the other hand, the administration focused its attention elsewhere. According to a Bloomberg article from February, the US Department of Justice's fraud branch was looking into Silvergate's ties with FTX and Alameda Research.
Closing Silvergate will have a devastating effect on the crypto industry's ability to transact with national money. The bank said on Mar. 3 that it will be ending the SEN. As cryptocurrencies are notoriously unstable, few banks are willing to deal with them.
