Silvergate Capital is finally tilting towards the market pressures it has been experiencing and has now announced plans to liquidate Silvergate Bank and wind down its operations. On Wednesday, the crypto central lender brought up questions about how banking systems will become rigid due to the United States’ regulatory requirements and this will in turn inhibit some businesses from entering the sector.
Based on a Securities and Exchange Commission (SEC) filing,
“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward,” adding that “The bank’s wind down and liquidation plan includes full repayment of all deposits. The company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”
Silvergate Bank Suffers FTX Contagion
Silvergate Capital has had its fair share of the dwindling crypto market and the company’s financial strength can no longer endure the strain. The company served alongside Signature Bank as the primary financial institution for digital assets firms. Compared to the $114 billion which New York-based Signature Bank has in assets under management (AUM), Silvergate Bank had just a little over $11 billion in AUM.
The regulatory concern is only a minor contributor to the present financial woes of Silvergate Bank. It is noteworthy that now-bankrupt cryptocurrency exchange FTX was a prominent customer of the bank with major stakes. The implosion and bankruptcy filing of the Bahamian-headquartered crypto trading platform took a significant toll on the crypto-friendly bank as other entities which were previously in business with Silvergate bank began to sever their ties.
Only last week, publicly listed business intelligence MicroStrategy declared that it shared no connection with Silvergate apart from a loan repayment which is not due until another two years. The BTC heavyweight emphasized that the current unfortunate situation at Silvergate can in no wise accelerate the repayment of this loan. Additionally, MicroStrategy clarified that none of its BTC holdings is held as collateral by the crypto bank.
The U.S. Department of Justice (DoJ) is still investigating Silvergate for its connection with FTX and its sister trading firm Alameda Research.
