Crypto-friendly lender Silvergate collapses – CNN

New York-based crypto-focused lender Silvergate (CNN) said it is closing operations and liquidating the bank after being hit financially by the turmoil in digital assets.

“In light of recent industry and regulatory developments, Silvergate believes that an orderly closure of the Bank’s operations and a voluntary liquidation of the Bank is the best way forward,” it said in a statement on Wednesday.

The bank’s plan includes “full repayment of all deposits,” she said.

The Silvergate collapse is a rare example of crypto volatility spilling over into the mainstream banking system. The bank is a traditional, federally insured lender that positioned itself as a gateway to the digital asset space.

So far, however, there appears to be little danger of the Silvergate turmoil spreading to other banks, said Dave Weisberger, CEO of CoinRoutes, an algorithmic trading platform.

“The problems Silvergate faced were largely the result of less-than-adequate risk management, particularly over-reliance on short-term volatile deposits while lending or investing at longer durations,” Weisberger said. “This is not like the collapse of FTX, where investors lost their deposits, but, rather, an orderly dissolution.”

Still, the Silvergate collapse is the latest in a string of failures among prominent crypto-related companies that is fueling calls for greater regulation of digital assets.

Senator Elizabeth Warren, a vocal critic of crypto, took to Twitter shortly after the Silvergate announcement.

“As the bank of choice for crypto, Silvergate Bank’s failure is disappointing but predictable,” she wrote. “Now, customers need to be satisfied and regulators need to step up against crypto risk.”

Shares of Silvergate are down 97% from their November 2021 high – a decline that mirrors that of the broader crypto market. A string of bankruptcies and scandals in 2022, including the stunning implosion of Sam Bankman-Fried’s business empire in November, have left the crypto industry reeling.

Once valued at $3 trillion, the entire market is now worth about $1 trillion.

Wednesday’s announcement comes a week after Silvergate delayed its annual filing with the Securities and Exchange Commission, warning it could go out of business. The news prompted the bank’s biggest crypto-industry clients, including Coinbase and Paxos, to withdraw their deposits.

The La Jolla, Calif.-based lender reported a $1 billion loss for the fourth quarter as investors panicked over FTX’s collapse.