The crypto-friendly bank was a vital cog in the industry's ecosystem, serving as a fiat on-ramp for many businesses in the space.
Listen to the CoinMarketRecap podcast on Apple Podcasts, Spotify and Google Podcasts
Silvergate Bank has announced that it's entering voluntary liquidation — days after warning that it wouldn't be able to survive the year.
The crypto-friendly bank was a vital cog in the industry's ecosystem, serving as a fiat on-ramp for many businesses in the space.
But many companies had cut ties with Silvergate after it told the SEC that it wouldn't be able to file its annual report on time.
That came after the bank declared a $949 million loss in 2022, compared with a $76 million profit in 2021.
Silvergate is now going to wind down operations — and has stressed that its plans will see all deposits repaid in full.
The news saw Bitcoin dip below $22,000 — a level that bulls had been managing to successfully defend for most of the day.
Silvergate was chartered under the supervision of the California Department of Financial Protection and Innovation — and in a statement, it said it was keeping a close eye on the situation. Commissioner Clothilde Hewlett added:
"The department is evaluating compliance with all financial laws, as well as safety and soundness obligations, and is working closely with relevant federal counterparts."
A bear market and close exposure to Sam Bankman-Fried's FTX empire had dealt Silvergate a double blow — and the company's stock had tanked in recent months.
After news of the delayed SEC filing emerged, Silvergate's share price fell off a cliff — falling by more than 45% in after-hours trading.
During the height of the bull run in November 2021, the stock was trading at highs of $219 — meaning its share price has plunged by 96.5% in a little under 18 months.
Coinbase was first to announce that it was severing ties with Silvergate — followed by the likes of Galaxy Digital, Circle, Paxos, Gemini, Crypto.com and Bitstamp. Some went to great lengths to stress that they didn't have exposure to the bank.
In the run-up to November's dramatic bankruptcy, both FTX and sister trading firm Alameda Research had accounts at Silvergate — with the bank's website even featuring a glowing endorsement from fallen entrepreneur Sam Bankman-Fried.
FTX's demise had led customers to withdraw deposits worth about $8 billion from Silvergate — piling pressure on the bank at a time when trading volumes were already low.
Analysts are divided on how much of an impact Silvergate's voluntary liquidation will have on Bitcoin's price in the long run, but there's no denying that this is a substantial setback for major crypto firms who have just lost an important link with the traditional banking sector.
