Crypto-Friendly Bank Silvergate Shuts Down

Silvergate Bank is shutting down its operations, but assured that all customer deposits will be fully refunded.

Risks of Traditional Banking

Another pillar of the crypto industry has succumbed.

Silvergate Capital Corporation, the holding company of Silvergate Bank, Announced yesterday its intention to completely liquidate the operations.

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

Silvergate told the Securities and Exchange Commission earlier this month that it was perhaps “less than well capitalized” and was “reassessing its business.” The company also admitted that it was not sure of its ability to continue operating. News sent shock waves across the crypto industry, with major companies like Coinbase, Paxos, Circle, Galaxy Digital, and CBOE quickly announcing that they would pause transactions to and from Silvergate.

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

Silvergate had previously disclosed a $1.05 billion loss in Q4 2022 due to the “crisis of confidence” the crypto industry experienced following the FTX collapse. However, former FDIC chair Sheila Bair told Bloomberg yesterday that “Silvergate’s problems [were] as much, if not more, on traditional banking risks (lack of diversification, maturity mismatches) as on their exposure to cryptocurrencies.”

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