On Wednesday, Silvergate Capital (NYSE:SI), one of the leading crypto banking giants, announced that it will wind down operations and liquidate its subsidiary, Silvergate Bank. The company’s stock took a hit. Silvergate Bank, which has just over $11 billion in total assets, has been one of the key players in providing banking services to the crypto industry. However, the decision to close the bank comes as a blow to the cryptocurrency community, which relies heavily on such services.
Silvergate’s decision starkly contrasts its New York-based counterpart, Signature Bank, which has over $114 billion in total assets and continues to expand its crypto-banking services.
Silvergate to Wind Down Operations and Liquidate its Bank
“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.”
Silvergate Capital [1]
Silvergate suspended its vital payments platform, the Silvergate Exchange Network (SEN), after the market closed on March 3rd. In their statement regarding liquidation, Silvergate announced that they will no longer operate their payments network. However, they made it clear that all other deposit-related services will continue to be available as the company goes through the process of winding down. In case of any additional changes, customers will be duly informed.
The company disclosed that the delayed 10-K filing was partly due to an imminent regulatory crackdown, including a probe already underway by the Department of Justice.
After that notice and filing, companies in the crypto industry who were using Silvergate Bank, such as Coinbase, Paxos, and Galaxy Digital, chose to separate themselves from the bank. As a result, there was a quick increase in the number of withdrawals being made.
Silvergate has recruited Centerview Partners LLC as its financial advisor, Cravath, Swaine & Moore LLP as its legal advisor and Strategic Risk Associates to offer aid pertaining to project management during the transition phase of the liquidation process.
This event has raised concerns about the future of the crypto banking industry, especially as regulatory scrutiny continues to mount. Nonetheless, the news brings an end to Silvergate’s chapter as a significant player in the crypto banking world.
