The parent company for cryptocurrency-focused Silvergate Bank, Silvergate Capital Corporation, has declared its intention to wind down operations and voluntarily liquidate the banking division on Wednesday.
Days prior, Silvergate’s shocking announcement that the company was experiencing a financial problem had stunned the industry.
The organization, one of the few banks to function as a middleman in the institutional crypto market, is yet another victim of the “crypto winter” in the wake of FTX’s collapse, which employed the bank to transfer customer funds.
The bank was established in California three decades ago as a little local lender, but in recent years it has grown to become a major player in the cryptocurrency market.
With the ebb and flow of the market, so did its fortune. Deposits at Silvergate increased from over $2 billion in 2020 to over $10 billion in 2021 as token prices soared.
However, its deposits plummeted to $6.3 billion by the end of 2022, a decline of more than 50% from just three months earlier.
Silvergate tried to persuade investors and regulators that its exposure to the digital asset exchange was limited at the time of FTX’s bankruptcy last October.
“As of September 30, 2022, Silvergate’s total deposits from all digital asset customers totaled $11.9 billion, of which FTX represented less than 10%. Silvergate has no outstanding loans to nor investments in FTX, and FTX is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans. To be clear, our relationship with FTX is limited to deposits,” Alan Lane, Silvergate’s CEO, wrote in a statement in November.
According to a February Bloomberg article, US prosecutors in the Justice Department’s fraud division were looking into Silvergate’s interactions with FTX and Alameda Research.
Silvergate’s closure will significantly impact how money enters and leaves the cryptocurrency industry. The bank said on March 3 that it would stop operating the Silvergate Exchange Network, a cryptocurrency payments platform that allowed dollar transfers between investors and cryptocurrency exchanges around-the-clock.
Silvergate promised the consumers in a recent announcement that they would receive their deposits, so it won’t be total losses.