- The bank will repay all deposits in full
- Silvergate took out loans of $4.3b from the San Francisco Federal Home Loan Bank
Silvergate Capital Corp. will subject Silvergate Bank assets to voluntary liquidation and wind down operations, it said on Wednesday, March 8. The bank will repay all deposits in full within that framework.
Silvergate Capital is also taking into account how to preserve its remaining assets’ value and resolve claims.
Watchdog is “monitoring the situation”
The Department of Financial Protection and Innovation of California, the designated watchdog for Silvergate, will be monitoring developments. Sherrod Brown, Chair of the Senate Banking Committee, stated:
As the impact of FTX’s collapse continues to ripple outward, today we are seeing what can happen when a bank is over-reliant on a risky, volatile sector like cryptocurrencies. I’ve been concerned that when banks get involved with crypto, it spreads risk across the financial system and it will be taxpayers and consumers who pay the price. That’s why I am continuing to work with my colleagues in Congress and financial regulators to establish strong safeguards for our financial system from the risks of crypto.
Calling profit into question
Last week, it emerged the bank was facing inquiries from the DOJ and finance regulators. The news cast doubt over its ability to remain a "going concern:" a business that is operating and making a profit.
Major clients like Coinbase and Crypto.com parted ways with the bank as a result, and Silvergate Capital Corp.’s stock price lost 58%, falling to an all-time low of less than $6.
Red flags
A few months ago, Silvergate took out loans of around $4.3 billion from the San Francisco Federal Home Loan Bank, which the FDIC should have recognized as a red flag.
Silvergate also suspended the Silvergate Exchange Network (SEN), its internal processing service. It had been in operation for a very long time. The bank had been working with crypto companies for about a decade.
Silvergate is the first leading bank to collapse in almost three years and could be the biggest one to fail in almost 15, potentially spelling disaster for the future of crypto banking. However, its voluntary liquidation keeps it off the FDIC's official list of failed banks.
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