Crypto-friendly Silvergate Capital has recently announced that it has fully repaid all remaining deposit liabilities as part of its plan to wind down operations. The decision comes after the bank’s earlier announcement to voluntarily liquidate following losses resulting from the collapse of the crypto exchange FTX.
Silvergate’s Repayment and Potential Liabilities
According to a statement released by Silvergate, the bank has successfully repaid all remaining deposit liabilities and now holds less than $10,000. Despite positive cash and equivalent balances after the repayment, the bank still faces potential liabilities due to ongoing litigation, regulatory matters, and investigations.
This repayment marks a significant step in Silvergate’s winding down process, which began earlier this year. The bank had experienced a bank run following the collapse of FTX and had to sell debt securities at a significant loss to cover user withdrawals. As a result, the bank incurred a massive loss, surpassing its total profits since 2013. Additionally, its deposits decreased from $11.9 billion in 2021 to $3.8 billion at the end of 2022.
Impact on Crypto-Friendly Banks and the Search for New Partners
Silvergate’s decision to wind down operations is part of a larger trend among crypto-friendly banks affected by the 2022 crypto meltdown and its ripple effects on traditional finance firms. Several major banks collapsed earlier this year, causing a banking crisis in the industry.
The collapse of Silvergate, along with other crypto-friendly banks such as Signature Bank and SVB Financial Group, left many crypto companies without banking partners. This prompted them to seek out alternative options, with smaller regional banks and alternative payment service providers stepping in to fill the gap.
One such popular choice in the US is Customers Bancorp, which launched a real-time payment platform to facilitate the settlement of US dollar transfers for cryptocurrency transactions. Other US lenders, including Cross River Bank, Western Alliance Bancorp, and Axos Financial, have also provided banking services to some cryptocurrency companies.
