Silvergate Bank may not have been able to turn the current crisis around and decided to downsize its operations.
Silvergate voluntarily liquidated assets
According to a notice posted at dawn on March 9, the parent company of Silvergate Bank, Silvergate Capital Corp. (SI) said it would “voluntarily liquidate” the bank’s assets and scale down its operations.
As reported by Kyptos, Silvergate Bank has been a bank dedicated to providing USD trading services to many of the top crypto exchanges in the US since 2013 and is said to have also been affected by multiple wire crashes. of the crypto industry in 2022, especially the bankruptcy of the FTX exchange. By early March 2023, Silvergate informed the SEC that it could not file financial statements on time because it needed more time to re-assess assets, as well as being investigated by US authorities.
The above information has caused many crypto companies that are still Silvergate customers to unilaterally cut ties with the bank, forcing them to stop the inter-crypto exchange network called SEN.
As of March 9, Silvergate Capital said it had found law firms and financial firms to act as advisors, serve the process of “leadership transition” and return deposits to customers.
— db (@tier10k) March 8, 2023
The notice reads:
“Given the latest developments in the crypto industry and regulatory changes, Silvergate believes that the best course of action would be to downsize the bank’s operations and voluntarily liquidate assets. That will guarantee a full refund of customer deposits. The bank is also working on ways to resolve claims and preserve value for all assets, including technology and taxable assets.”
Silvergate’s SI share price continued to decline by 5.76% in the trading session on March 8 (US time). Since the beginning of 2023, SI shares have lost nearly 78% of their value, with the dump on March 2 alone, the day the bank announced its late submission of reports to the SEC, wiping away 58% of the value of SI shares. .
US officials closely monitor the situation of Silvergate
U.S. authorities, both state and federal, are keeping a close eye on the Silvergate crisis. The California Department of Finance and Progress, where Silvergate is headquartered, said it was monitoring the situation. Meanwhile, White House spokeswoman Karine Jean-Pierre earlier this week confirmed that the Biden administration is also extremely interested in Silvergate.
The chairman of the US Senate Banking Committee, Senator Sherrod Brown, issued the following statement:
“As the effects of the FTX crash continue to spread, today we have seen what can happen if a bank has extensive exposure to a risky and volatile sector such as money. encode. I have expressed concern that if the banking industry gets into crypto, it could spread the risk to the entire financial system and the taxpayers and the public will suffer the consequences. That’s why I and my colleagues in Congress and the financial authorities will continue to work to establish regulations that protect the financial system from the risks of cryptocurrencies.”
The reason the situation at Silvergate has received attention from the US government is because it is a traditional bank, has received a banking license and is insured by the FDIC. SIlvergate even conducted an IPO in 2018 and listed SI shares on the New York Stock Exchange. The banking crisis is the first time in history that a traditional financial institution has collapsed because of cryptocurrencies.
The impact of this event is likely to have many consequences in the future, both in terms of how cryptocurrency regulation will change, as well as how crypto businesses will use financial institutions. main way to handle USD cash flow. Mr. Alex More, an expert at the law firm Carrington, Coleman, Sloman and Blumenthal, commented:
“On the one hand, financial authorities will raise questions regarding the management of Silvergate and its banking relationship with crypto customers. On the other hand, the cryptocurrency industry at the moment has many barriers to access to the US banking system, and the Silvergate case only aggravates the problem.
Earlier this year, after the collapse of the FTX exchange, many US financial agencies simultaneously warned banks about the risks in providing services to companies with exposure to the money sector. encode. Since then, at least two major exchanges, Binance and Bybit, have admitted to losing their US banking partner, while the third, Gemini, on March 8 denied the information was cut off by JPMorgan. relationship.