Crypto-friendly lender Silvergate collapses – CNN
New York (CNN) Crypto-focused lender Silvergate said it is winding down operations and will liquidate the bank after being hit financially by digital asset turmoil.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly winding down of the bank’s operations and a voluntary winding down of the bank is the best way forward,” it said in a statement on Wednesday.
The bank’s plan includes “full repayment of all deposits,” it said.
Silvergate’s collapse is a rare example of crypto’s volatility spilling over into the mainstream banking system. The bank is a traditional, federally insured lender that positioned itself as a gateway to the digital asset space.
So far, however, there appears to be little risk of Silvergate’s turmoil spreading to other banks, said Dave Weisberger, CEO of CoinRoutes, an algorithmic trading platform.
“The problems facing Silvergate were primarily the result of less-than-adequate risk management, particularly one of relying too heavily on volatile short-term deposits while lending or investing with longer durations,” Weisberger said. “This is not like the collapse of FTX, where investors lost their deposits, but rather an orderly resolution.”
Still, Silvergate’s collapse is the latest in a series of failures by prominent crypto-related companies that are fueling calls for greater regulation of digital assets.
Senator Elizabeth Warren, a vocal critic of crypto, weighed in on Twitter shortly after Silvergate’s announcement.
“As the bank of choice for crypto, Silvergate Bank’s failure is disappointing but predictable,” she wrote. “Now customers need to be made whole and regulators should step up against crypto risk.”
Silvergate’s stock has fallen 97% from its peak in November 2021 – a decline that mirrors the broader crypto market. A string of bankruptcies and scandals in 2022, including the stunning implosion of Sam Bankman-Fried’s business empire in November, has sent the crypto industry reeling.
Once valued at $3 trillion, the entire market is now worth around $1 trillion.
Wednesday’s announcement comes a week after Silvergate delayed its annual filing with the Securities and Exchange Commission, warning it could go out of business. The news prompted the bank’s biggest crypto industry customers, including Coinbase and Paxos, to withdraw their deposits.
The La Jolla, Califorina-based lender reported a $1 billion loss for the fourth quarter as investors panicked over the collapse of FTX.
