Silvergate Bank, which had been a cornerstone in the crypto world, announced that it was closing and returning deposits. In A press releaseThe bank’s holding company, Silvergate Capital Corporation, said it made the decision to close “in light of recent industry and regulatory developments.”
It’s been clear for some time that the company has been struggling with some of its more high-profile customers like FTX and Genesis. In January, its earnings report revealed that it had lost $1 billion in one quarter after its clients withdrew $8.1 billion. Then, on March 1, she filed a document stating that her financial statements were even worse than the quarterly report had shown it.
There are several concerns about what the crypto landscape will look like without Silvergate, especially in regards to where companies will turn for money. My colleague Elizabeth Lopatto has done a great job summarizing many of them in this explainer. One of the main concerns is that crypto companies may turn to less regulated institutions for their banking needs, potentially making the space even riskier for everyone involved. In other words, if there isn’t a bank that plays by the rules and is willing to do business with them, they may have to find a bank that won’t.
As for the next steps for the bank, it is proceeding with the liquidation “in an orderly manner and in accordance with applicable regulatory processes” and “considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and its tax assets.”
As all of that waned, companies like Coinbase, Crypto.com, and Paxos began to move away from banking. Even the stablecoin Tether took the opportunity to distance itself from the institution. His list of allies was slim, and the government was scrutinizing him for his role in FTX’s collapse.
Silvergate’s collapse will almost surely attract the attention of lawmakers, especially those concerned about crypto contagion reaching the traditional financial sector.
“Today we see what can happen when a bank is too dependent on a risky and volatile industry like cryptocurrencies,” said Sen. Sherrod Brown (D-OH), chairman of the Senate Banking Committee. , housing and urban affairs. “I was concerned that when banks get involved in crypto, it spreads risk throughout the financial system and taxpayers and consumers pay the price.”