Crypto bank Silvergate collapses and announces voluntary liquidation

The Titan silver gate plans to end its operations as crypto markets face severe turbulence. Quoting “recent industry and regulatory developments“, silver gate Capital announced in a press release on Wednesday voluntary liquidation form the bank. According to the company, it is “the best way forward due to recent industry and regulatory developments”. The disclosure of this announcement caused its stock in after-hours trading. Here is the report.

Crypto bank Silvergate to close amid market turmoil

“We believe that an orderly closure of the Bank’s operations and a liquidation voluntary are the best way to go. The liquidation plan includes the full repayment of all deposits”has indicated Silvergate Bank in a press release. The bank announced that it would shut down its exchange network saying the termination was a “risk-based decision“. At the time when the bank announced its voluntary liquidation process, Silvergate was already under investigation from members of Congress, as well as investigations by the Federal Reserve and the California Department of Financial Protection and Innovation. The liquidation of Silvergate will be overseen by financial advisor Centerview Partners LLC and law firm Cravath, Swaine & Moore LLP.

The end of Silvergate could put the industry crypto troubled currencies, especially for companies that have used the bank’s services to receive deposits. There are now fears that these companies will use less regulated institutions, which would make the market even more risky for everyone involved. While bank liquidates and is considering how best to resolve claims and preserve the residual value of its assets, including its own technology and tax assets, companies such as Coinbase, Crypto.com and Paxos withdraw from the bank. Even the stablecoin Tether took the opportunity to distance himself from the institution.

More regulation in the future

The Silvergate Collapse could attract the attention of lawmakers, especially those concerned about the contagion of the cryptocurrency that hits the traditional financial sector. “Today we see what can happen if a bank is too dependent on a volatile and risky sector like cryptocurrencies.” said the senator Sherrod Brown (D-OH), chairman of the Senate Banking, Housing, and Urban Affairs Committee. “I fear that when banks get involved in cryptocurrencies it will spread risk throughout the financial system and it will be taxpayers and consumers who will pay the price.“, he continued. The collapse of FTX had already encouraged investors to withdraw money from Silvergate.

In effect, silver gate reported in early January that customers withdrew more than $8 billion in deposits crypto in the final quarter of last year, forcing it to sell billions of dollars in assets to protect its balance sheet. Nevertheless, it is important to note that the voluntary liquidation is not a declaration of bankruptcy, which means that silver gate should have no problem repay creditors. Despite this, the effects are already visible as trade volumes have fallen across all sectors and market players remain reluctant to intervene.

It is now on the side of the Silicon Valley that a banking institution worries all the financial markets. Cash-strapped, a venture capital funding giant in California, the Silicon Valley Bankhad to quickly liquidate part of its portfolio of US treasury bonds and bonds for $21 billion, taking $1.8 billion in losses before launching a increase in capital to bail out to the tune of $2.25 billion.

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