The threat of bankruptcy has extended and nothing else could save the crypto bank except itself. Silvergate announced today it would shut down operations and liquidate its bank in an effort to cope with the recent crisis.
According to Silvergate’s declaration on Business Wire, Silvergate Capital Corporation, the parent company of Silvergate Bank, plans to “wind down operations and voluntarily liquidate the Bank.”
The bank considers the move as the best solution to deal with the hardships “in light of recent industry and regulatory developments.”
The End of Silvergate
Upon the new plan, all deposits are subject to repayment. Silvergate also looks for the best way of resolving claims and securing “the residual value of its assets, including its proprietary technology and tax assets.”
News of the wind-down process drove down Silvergate’s stock price (SI) on March 8, sinking 78% of its value since the beginning of this year. Last week, the bank lost 58% of its stock value after having announced the delay of its annual report.
Despite previous ongoing efforts to overcome the financial trouble, Silvergate eventually had to close its doors, no thanks to the effect of FTX’s demise.
Over the past few weeks, the bank was the topic of discussion in both mainstream and crypto media after revealing its financial struggles.
But it was not until the delay announcement and a series of breakups with major crypto firms that the industry got frightened.
Negative news has pushed the market to the fear zone, worrying that this latest collapse could trigger another ripple effect on the crypto-economy.
More Trouble Ahead?
The crypto market took a dive following the news. The market has undergone another correction. Bitcoin (BTC) was down to $21,580, its lowest mark since February 13 before slightly rebounding to $21,700. Ethereum (ETH) also decreased to around $1,500.
At press time, most of the top 20 altcoins drop around 2% to 5%, except for Solana (SOL) and Polygon (MATIC). MATIC and SOL are down by 6%. According to estimates, both coins have lost over 15% of their value in the last 7 days.
MATIC and SOL had the strongest rally in the first two months but recent events brought them back down.
The space’s concern is mounting as regulators might take Silvergate as a bad example of how bank and crypto shouldn’t merge, and obviously, how certain restrictions must be applied.
Silvergate was the banking vagabond that stepped in to work with crypto exchanges in the U.S.
The bank historically partnered with major industry names including Coinbase, Kraken, Bitstamp, Paxos, and MicroStrategy, among others. Notably, Silvergate was known for its close relationship with FTX.
Since the collapse of the FTX exchange in November 2022, Silvergate is rumored to be in trouble when in its Q4/2022 report, the bank admitted a net loss of $1 billion, customers withdrew up to $8 billion.
The bank announced the layoff of 40% of its workforce to keep the business afloat. The bank’s link with FTX is currently being investigated by the US government.
Notwithstanding the closures, US regulators are keeping a tight eye on the bank’s crisis. The California Department of Finance and Progress, where Silvergate is based, said it was keeping an eye on the matter.
The U.S. government took notice of what was going on at Silvergate because it is a bank with a license and FDIC insurance. SIlvergate even went public in 2018 and sold SI shares on the New York Stock Exchange as part of an IPO.
This is the first time in history that a traditional financial institution with close ties to cryptocurrency has failed. No matter what the root cause was, this event is likely to have big effects on how cryptocurrencies are regulated in the future.