Silvergate Bank Faces “Voluntary Liquidation”

The parent company of one of the major crypto-friendly banking institutions, Silvergate Bank, decided to “wind down operations” and liquidate the bank

Silvergate Bank liquidation

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Silvergate Capital Corporation announced it would “voluntarily liquidate” the Silvergate Bank “in light of recent industry and regulatory developments.”

Silvergate was one of the major banking partners for many crypto firms, including the now-bankrupt FTX. As the bank became a subject of the federal investigation in this respect, many companies e.g. Coinbase, Paxos, Gemini, BitStamp and Galaxy Digital cut their ties with the institution.

At the end of Q4 2022, Silvergate deposits plummeted to $3.8 billion, down from $11.9 billion in the previous year. 

A few days ago, Silvergate warned it would miss the annual financial report deadline, raising questions about its ability to survive. Moreover, the bank made a “risk-based decision” to close its exchange network on March 3.

The next step from the parent company was a liquidation plan for the bank which includes “full repayment of all deposits”. Silvergate is also considering the best ways to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.

Except for the already terminated Silvergate Exchange Network (SEN), all other Silvergate’s deposit-related services should remain operational as long as the company works through the wind-down process.

It is yet unclear whether the event will affect the crypto industry. However, the liquidation will hit some of the traditional financial/investment players, as some of them had a stake in Silvergate. For instance, Citadel Securities and BlackRock have recently disclosed their 5.5% and 7% stakes in the company, respectively.

Upon the news, Silvergate’s stock (SI) fell by over 5% in the after-hours trading session. Bitcoin has not been significantly affected, showing a small decline of 1,65%.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.