Silvergate bank, a bank that mostly deals in crypto transactions has recently announced plans to wind down operations and liquidate, in accordance with the applicable regulatory processes.
The company said in a statement, “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”.
This move is coming days after the bank disclosed that it was faced with a financial crisis, and believes that shutting down its operation is the best path forward. Its liquidation plan includes full repayment of all deposits.
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In addition, Silvergate Bank decided to discontinue the Silvergate Exchange Network (SEN), which it announced on March 3, 2023, on its public website. All other deposit-related services remain operational as the Company works through the wind-down process. Customers will be notified should there be any further changes.
Crypto firms such as Galaxy Digital and Coinbase did not hesitate to cut ties with Silvergate last week after the bank warned that it was unsure whether it could continue its business operations. Silvergate has served as one of the two main banks for crypto companies, along with New York-based Signature Bank. Bankrupt crypto exchange FTX was a major Silvergate customer.
At the time of FTX’s collapse last year, Silvergate via a statement reassured investors and regulators that its exposure to the digital assets exchange was limited to only deposits. Meanwhile, Silvergate’s deposits plummeted nearly 70% in the fourth quarter of 2022 as investors expressed concerns.
When the bank announced its preliminary fourth-quarter results, investors discovered that things were far worse than feared. Deposits at the bank had plummeted, and the stock fell another 43%. In January this year, the company announced plans to lay off 40% of its workforce to account for the economic realities facing the business and industry today.
Regarded as one of the leading providers of innovative financial infrastructure solutions and services for the growing digital asset industry, the company’s real-time payments platform, known as the Silvergate Exchange Network, is at the heart of its customer-centric suite of payments, lending, and funding solutions serving an expanding class of digital asset companies and investors around the world.
Its earliest product was the Silvergate Exchange Network (SEN), which allows cryptocurrency exchanges like Coinbase, Binance, and the now-bankrupt FTX to transfer U.S. dollars between one another quickly and efficiently.
The bank is reported to have enjoyed massive growth as the price of Bitcoin exploded to over $65,000 in 2021. From 2019 to 2021, Silvergate’s total deposits mushroomed from $1.8 billion to $14.3 billion. Analysts disclose that the shutdown of Silvergate operations will deal a big blow to how money moves in and out of the crypto industry.