• Silvergate Bank announced it would begin winding down operations and undergo voluntary liquidation on March 8.
• The decision was made in light of „recent industry and regulatory developments,“ its holdings company Silvergate Capital said.
• Since the collapse of FTX in November 2022, the bank has seen its stock price depreciate by over 94%.
Silvergate bank announced it would begin winding down operations and undergo voluntary liquidation on March 8. The decision was made in light of „recent industry and regulatory developments,“ its holdings company Silvergate Capital said. Since the collapse of FTX in November 2022, the bank has seen its stock price depreciate by over 94%. This news sent shockwaves through the crypto market, as the U.S. bank served as the backbone for the crypto market, providing financial services to most large crypto companies and exchanges in the country.
How Silvergate got big
Silvergate had enjoyed success since its inception in 2018 due to its avant-garde approach to banking for cryptocurrency businesses. It quickly established itself as one of America’s top digital asset banks, offering services such as deposits and withdrawals from U.S.-based exchanges, support for digital asset trading pairs on exchanges, and custodial services for major institutional investors. This allowed them to become a trusted partner for many leading cryptocurrency firms based in America such as Coinbase, Kraken, Gemini, Binance US, BlockFi, Paxos Standard Token (PAX), etc..
Silvergate’s quick and painful death
The decline at Silvergate began when they decided to discontinue their real-time settlement service SEN (Silver Exchange Network) after facing inquiries from the Department Of Justice (DOJ). Following this move their stock prices dropped 57% within 24 hours. Compounding this issue further Bitcoin also dropped to its January low of $19 680 after trading flat at around $21 000 for over a month resulting in a dip below $1 trillion crypto market cap with investor sentiment worsening daily according to declining trading volumes with growing exchange withdrawals reported.
The domino effect
The situation at Silvergate triggered a domino effect which could not only affect U.S.-based cryptocurrency companies but also have an impact on other banking sectors across America too due to possible regulatory blowback from government agencies such as DOJ or SEC leading to stricter regulations that could affect banking activities related to cryptocurrencies adversely affecting companies who need access to traditional banking services linked with digital assets .
Regulatory blowback can be expected due to greater scrutiny from government agencies like DOJ or SEC who may push for tighter regulations which could limit access by American companies dealing with digital assets from utilizing traditional banking services connected with cryptocurrencies . Such policies could lead make it difficult or near impossible for these firms secure liquidity or raise capital through traditional means making them reliant solely on private investments if feasible .
It is hard to predict what will happen next following this incident involving Silvergate bank but one thing is certain that it will leave a lasting impression on how we perceive traditional banking when dealing with cryptocurrencies going forward . With increased regulation expected , caution should be taken before taking any actions so that no mistakes are made while trying navigate this new terrain emerging out of this incident .