Key points to remember
- Silvergate Bank announced yesterday that it would voluntarily go into liquidation.
- The bank assured that all customer deposits would be fully refunded.
- Silvergate had previously informed the SEC that it was “less than well capitalized”.
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Silvergate Bank is closing its operations, but has assured that all customer deposits will be fully refunded.
Traditional banking risks
Another pillar of the crypto industry has succumbed.
Silvergate Capital Corporation, the holding company of Silvergate Bank, announcement yesterday, its intention to completely cease its activities.
The bank said in its press release that it would voluntarily go into liquidation “in an orderly manner and in accordance with applicable regulatory processes.” The bank said all customer deposits would be fully refunded and it was currently seeking 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 “reassessing its business.” The company also admitted to being uncertain about its ability to continue operations. The news sent shock waves Across the crypto industry, major companies such as Coinbase, Paxos, Circle, Galaxy Digital, and CBOE all promptly announced that they were suspending transactions to and from Silvergate.
Shortly after, Silvergate made the decision to terminate the Silvergate Exchange Network (SEN), which it used to allow customers to exchange government-issued currencies for cryptocurrencies.
Silvergate previously disclosed a $1.05 billion loss in the fourth quarter of 2022 due to the “crisis of confidence” the crypto industry experienced following the collapse of FTX. However, former FDIC Chair Sheila Bair told Bloomberg yesterday that “Silvergate’s problems (are) as much, if not more, about traditional banking risks – lack of diversification, maturity mismatches – as it is about its exposure to cryptography”.
Disclosure: At the time of writing this article, the author of this article owned BTC, ETH, and several other crypto assets.