• Silvergate Bank has begun the voluntary process of liquidation, according to a statement from the California Department of Financial Protection and Innovation.
• The bank experienced a $1 billion loss in the final quarter of 2022 due to the collapse of FTX cryptocurrency exchange and had to return a $9.85 million deposit to BlockFi.
• Silvergate’s SEN was designed to offer instant 24/7 transfers and was seen as significantly lowering the barrier to investing in crypto.
Crypto-Friendly Silvergate Bank Announces ‘Voluntary Liquidation’
Silvergate Bank, a US-based crypto-friendly bank, has begun the voluntary process of liquidation, according to an announcement by the California Department of Financial Protection and Innovation (DFPI). This news comes just one day after reports surfaced suggesting that the bank was discussing ways to avoid a shutdown with US federal officials.
Majority of Crypto Clients Abandoned Bank
After Silvergate delayed its annual 10-K filing report, many crypto clients abandoned the bank, causing its share price to tumble. The bank cited multiple reasons for this delay including responding auditor requests, ongoing regulatory inquiries, and investigations. It also recently halted its popular Silvergate Exchange Network (SEN) service which enabled 24/7 transfers between investors and crypto exchanges.
FTX Collapse Caused Losses
Silvergate reported a whopping $1 billion loss in the final quarter of 2022 thanks to the collapse of FTX cryptocurrency exchange. These concerns caused depositors to pull around $8 billion out from the bank in that same quarter. Additionally, it had to return a $9.85 million deposit made by BlockFi amidst their ongoing bankruptcy proceedings.
Liquidation Marks Blow for Crypto Adoption Narrative
The liquidation of Silvergate marks another major blow for those hoping for wider adoption of cryptocurrencies within traditional financial services sector. The SEN service offered by Silvergate was seen as significantly lowering barriers for investing in cryptos as it allowed for instant 24/7 transfers when compared with other banks which can take up days or even weeks before settling transactions.
Silvergates Total Assets Reach Around $11 Billion
At time at closing down operations, Silvergates total assets reached roughly around $11 billion – some way below competitor crypto focused banks managing over $100 billion in assets such as Galaxy Digital Holdings Ltd..