Crypto-friendly US-based bank Silvergate Bank has started the voluntary process of liquidation, according to a statement Issued by the California Department of Financial Protection and Innovation (DFPI).
The announcement of the liquidation of Silvergate Bank comes just a day after reports surfaced suggesting that the bank was discussing ways to avoid a shutdown with US federal authorities.
Majority of the bank’s crypto customers left the bank Earlier this month, after Silvergate delayed filing its annual 10-K filing, its share price plummeted.
The bank cited several reasons for the delay, including the need to respond to auditor requests, ongoing regulatory inquiries and investigations.
At the time, Silvergate also warned that its ability to continue normal operations over the next year could be affected, prompting a rush by the bank’s customers to terminate relationships.
The bank also recently shut down its popular Silvergate Exchange Network (SEN) service, which enabled 24/7 transfers between investors and crypto exchanges.
Silvergate reports $1 billion loss in the last quarter of 2022 due to the collapse of the FTX cryptocurrency exchange. Concerns arose about the bank’s relationship with FTX Depositors Will Pull Out $8 Billion from the bank in the last quarter of last year.
Silvergate recently had to roll back a $9.85 million deposited in BlockFi Amidst the ongoing bankruptcies of failed crypto lenders.
A Setback to the Crypto Adoption Narrative?
Silvergate’s liquidation marks the fall of another major player in the cryptocurrency space. It is also a blow to the crypto adoption story. Silvergate’s SEN, the bank’s flagship project, was seen as significantly lowering the barrier to investing in crypto.
Transferring fiat currency to a crypto exchange via bank transfer is widely seen as one of the cheapest ways to buy crypto (card purchases come with a 2-4% fee). But transfers made with most banks may take a few days to settle.
Silvergate’s SEN was designed to address this issue by offering instant 24/7 transfers. The service was described by observers as a major step forward in the integration of crypto and the traditional financial services sector.
Silvergate Bank closed with approximately $11 billion in total assets. That’s just under $114 billion in assets under management by fellow crypto-focused, New York-based bank Signature Bank.
Kraken, a popular US-based cryptocurrency exchange, recently announced that it will Setting up your own crypto-focused bank. Perhaps newcomers can fill the empty shoes left by the defunct Silvergate Bank.