Silvergate Bank To Wind Down Operations After Crypto Industry’s Meltdown
By Due to the crypto industry's decline causing Silvergate Capital Corp.'s financial situation to weaken, the company intends to cease operations and liquidate its bank, resulting in its stock prices dropping significantly. Silvergate Bank, widely recognized in the cryptocurrency sector as a major crypto bank, is having its parent company initiate the process of “wind down operations” and liquidating the bank.
The bank has announced that it will make a plan to ensure “full repayment of all deposits,”.[0] Today, numerous cryptocurrencies, including Bitcoin, are experiencing substantial losses in value.[1] As of this writing, XRP, MATIC, and BNB have all dropped more than 5% in the last 24 hours.[1]
The downfall of FTX and Celsius has brought forth qualms regarding the dependability and continuing success of the crypto sector.[2] Silvergate Bank has been battling issues with regulators over its link to FTX and Alameda Research, two firms currently bankrupting.[1] The crypto winter of 2022 and its associated contagion had a detrimental effect on its ability to continue operations, as stated in its statement.[1]
Since FTX's collapse, the bank has seen at least $8 billion withdrawn by customers in a rush.[3] As of December 31, 2022, Silvergate's unaudited financial statements for the fourth quarter indicated that the company had a total of $4.6 billion in cash.[3]
Upon Silvergate's announcement of difficulties last week, Coinbase, Circle, Galaxy Digital, and Paxos quickly moved to terminate any association with the bank.[3] The Silvergate Exchange Network, a major payments network hub for the crypto industry that was a major draw for depositors, was subsequently shut down by the company.[3]
After Silvergate's announcement, Senator Elizabeth Warren, who has been vocal in her criticism of crypto, took to Twitter.[0]
“I warned of Silvergate’s risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk,” she tweeted.[4]
Last Wednesday, Silvergate revealed that it was in danger of failing to remain in business, a week after it delayed its annual filing with the Securities and Exchange Commission.[0] The announcement of that news caused the biggest crypto-industry clients of the bank, including Coinbase and Paxos, to withdraw their deposits.[0]
In Washington, the United States' federal prosecutors are looking into the activities of the company, as well as its connections with FTX and Alameda Research.[5] In January, a request was made by three US senators of Silvergate for information regarding its risk management and FTX.[5]
0. “Crypto-friendly lender Silvergate collapses” CNN, 9 Mar. 2023, https://www.cnn.com/2023/03/08/business/silvergate-winds-down-crypto/index.html
1. “The Time to Sell Bitcoin (BTC) Is Now, Says Peter Schiff | Bitcoinist.com” Bitcoinist, 9 Mar. 2023, https://bitcoinist.com/sell-bitcoin-btc-now-says-peter-schiff/
2. “Crypto-Friendly Banks Collapse as Regulatory Pressure Mounts” BeInCrypto, 11 Mar. 2023, https://beincrypto.com/crypto-friendly-banks-collapse-regulatory-pressure-mounts/
3. “Crypto crash: Key bank Silvergate to close after FTX collapse” Markets Insider, 9 Mar. 2023, https://markets.businessinsider.com/news/stocks/crypto-crash-silvergate-bank-shut-down-liquidate-stock-market-news-2023-3
4. “Elizabeth Warren Blames ‘Crypto Risk' for Silvergate Bank's Liquidation, Critics Dismiss Senator's Claims as ‘Terribly …” Bitcoin News, 9 Mar. 2023, https://news.bitcoin.com/elizabeth-warren-blames-crypto-risk-for-silvergate-banks-liquidation-critics-dismiss-senators-claims-as-terribly-misinformed
5. “Crypto bank Silvergate announces liquidation amid sector turmoil” The Guardian, 9 Mar. 2023, https://www.theguardian.com/technology/2023/mar/09/crypto-bank-silvergate-liquidation-sector-turmoil-wind-down-ftx-exchange
