Crypto Friendly Bank Silvergate Closes

Silvergate Bank is winding down operations, but it assured that all customer deposits would be refunded in full.

Traditional banking risks

Another pillar of the crypto industry has succumbed.

Silvergate Capital Corporation, the holding company for Silvergate Bank, announced yesterday it intended to cease operations completely.

The bank indicated in its press release that it would voluntarily undergo liquidation “in an orderly manner and in accordance with applicable regulatory processes.” The bank stated that all customer deposits would be refunded in full and that it was currently working out how to resolve claims and preserve the value of its assets.

Silvergate told the Securities and Exchange Commission earlier this month that it may be “less than well capitalized” and that it was “re-evaluating its business.” The company also admitted to being uncertain about its ability to continue operations. The news sent shock waves throughout the crypto industry, with major firms such as Coinbase, Paxos, Circle, Galaxy Digital and CBOE all quickly announcing that they were halting transactions to and from Silvergate.

Shortly thereafter, Silvergate made the decision to discontinue the Silvergate Exchange Network (SEN), which it used to enable customers to exchange government-issued currencies for cryptocurrencies.

Silvergate had previously disclosed a loss of $1.05 billion in the fourth quarter of 2022 due to the “crisis of confidence” that the crypto industry experienced after FTX’s collapse. However, former FDIC Chairman Sheila Bair told Bloomberg yesterday that “Silvergate’s problems [were] as much, if not more, about traditional banking risk – lack of diversification, maturity mismatches – as it is about exposure to crypto.”

Disclosure: At the time of writing, the author of this piece owned BTC, ETH and several other crypto assets.