The recent collapse of FTX has removed a high profile player from the crypto landscape, and Silvergate Capital followed by announcing a voluntary shutdown of Silvergate Bank. The decision comes as the firm confirms it has secured all deposits totaling six billion dollars. In a statement, Silvergate noted that given ongoing industry shifts and tightening regulatory expectations, an orderly wind-down of the bank and the liquidation of the company represents the clearest path forward for stakeholders.
The move did not catch crypto firms by surprise. Silvergate had already notified the Securities and Exchange Commission about delays in filing its 2022 annual report as it reassessed the viability of its business model and strategy against a backdrop of market and regulatory headwinds. The company disclosed a 2022 net loss of around 948.6 million dollars, a sharp swing from a profit of 75.5 million the prior year, highlighting the pressure on its operations and balance sheet.
Investors quickly expressed concern, with Silvergate’s stock dipping more than 63 percent within a week. Market analysts note that while the immediate effects resonate across the sector, the broader crypto ecosystem has resilience. As one analyst commented, new assets tend to emerge from industry shakeups, and alternative payment channels often fill the gaps left by traditional platforms. The recent wave of bankruptcies includes other crypto entities, and even major exchanges have announced strategic adjustments as a result of the FTX crisis.
The decline in customer deposits has been a key factor. The company experienced a rapid outflow after November’s FTX-related turmoil, with deposits dropping sharply in the final quarter. Silvergate reportedly sought a loan facility from the Federal Home Loan Bank to manage liquidity pressures and sustained withdrawal volumes surpassing several billions of dollars. In response, the bank implemented drastic steps, including significant staff reductions and the closure of its proprietary digital payment network, the Silvergate Exchange Network.
Under scrutiny from regulators, the crypto sector in the United States has faced heightened attention. In December, a group of U.S. lawmakers requested detailed records of the FTX transactions processed by Silvergate. The then-CEO Alan Lane indicated that deposits linked to the FTX ecosystem represented a small fraction of the overall deposit base. The bank has yet to publicly resolve certain questions surrounding those deposits and relationships.
Despite these statements, multiple inquiries from U.S. authorities remain unanswered, including an ongoing inquiry by the Department of Justice into possible ties between FTX and Alameda Research. Industry observers note that while investigations continue, no misconduct charges have been filed against Silvergate to date. Analysts emphasize that the situation underscores the heightened regulatory environment surrounding digital asset firms and the importance of robust risk controls and transparent reporting for institutions operating in this space [Citation: Market analysts and regulatory updates].