San Diego-based Silvergate Capital Corporation, the parent company of Silvergate Bank, has announced plans to “wind down operations” and liquidate the bank. In a statement released on March 8, the company said the decision to shutter operations was “in light of recent industry and regulatory developments.”
Silvergate Bank, known to many in the cryptocurrency space as one of the major crypto banks, has been under investigation for its alleged involvement in the collapse of FTX. Following the investigation, many crypto firms, including Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital, announced in March that they would cut ties with the bank.
The bank had also announced that it would be closing its exchange network on March 3, citing a “risk-based decision.” Silvergate was one of the major banking partners for many crypto firms, but drew concerns about its solvency following an announcement it would delay the filing of its annual 10-K report by two weeks. The document typically provides an overview of a company’s financial situation.
According to the company, the Silvergate Bank liquidation plan includes “full repayment of all deposits.” However, it remains unclear what the impact of the bank’s liquidation will be on other crypto firms with funds tied to the bank or otherwise exposed.
The decision to liquidate the bank is a significant move in the cryptocurrency industry, as Silvergate was considered to be a major player in the space. The bank had been one of the first to embrace cryptocurrencies, offering banking services to many cryptocurrency exchanges and investors.
In a statement, the company claimed that the bank’s voluntary liquidation is its best path forward due to recent industry and regulatory developments. Silvergate Capital Corporation CEO Alan Lane said, “Silvergate Bank has been proud to serve the digital currency industry since 2013. We appreciate the trust and confidence that our customers have placed in us, and we remain committed to ensuring a seamless and orderly wind-down of the bank.”
The news of the bank’s liquidation has sent shockwaves through the cryptocurrency industry, with many wondering what impact it will have on the market. It remains to be seen how other crypto firms will react to the news and whether there will be any significant fallout.
The bank reported that the transfer volume of consumer fiat deposits dropped roughly $50 billion in the third quarter of 2022 compared to that over the same period in 2021. This decline was likely due to concerns over the bank’s solvency and involvement in the collapse of FTX.
The cryptocurrency industry has faced increased regulatory scrutiny in recent years, with many governments and regulatory bodies looking to impose stricter regulations on the industry. The liquidation of Silvergate Bank may be seen as a warning to other cryptocurrency firms that they need to be mindful of regulatory compliance and solvency concerns.