It is the first U.S. bank to go out of business since 2020.
It’s a new thunderclap that falls on the crypto industry. A disaster that had been brewing for a few days and which has just shaken the young financial services industry, powered by blockchain technology. Silvergate Bank, one of the few banks to embrace the crypto sphere, is out of business, suffering from its exposure to the numerous bankruptcies of crypto firms since last summer.
The company “announced its intent to wind down operations and voluntarily liquidate the bank in an orderly manner and in accordance with applicable regulatory processes,” it said in a press release on Mar. 8.
It continued: “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.”
“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.”
According to Sheila Warren, CEO of the Crypto Council for Innovation, “this is a voluntary wind down under California law, which implies that they will be able to make depositors whole.
Neither taxpayer money, nor the FDIC, are involved.” FDIC stands for the Federal Deposit Insurance Corporation, a guarantor for bank depositors.
What was the caused this action, well, Federal regulators have never publicly accused Silvergate of any wrongdoing.
But besides FTX and Alameda Research, Reuters reported last month that Binance, the world’s largest cryptocurrency exchange, had access to a bank account belonging to its American subsidiary Binance.US. The bank account was held at Silvergate Bank.
Binance executives transferred hundreds of millions from this account to a trading platform, Merit Peak. The manager of Merit Peak was Changpeng Zhao, the founder of Binance and a major rival of Sam Bankman-Fried.
At the time, Binance.US executives were unaware of these money movements and learned about them after they were made, according to Reuters, which cited text messages between the CEO of Binance.US and a Binance executive.
