Crypto market falls on the news of Silvergate Capital announcement that it will be winding down operations to liquidate its’ bank. The company stock plunged over 36% in after hours trading.
As the bank of choice for crypto, Silvergate Bank's failure is disappointing, but predictable. I warned of Silvergate's risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk.— Elizabeth Warren (@SenWarren) March 8, 2023
Silvergate’s news is a matter of serious concern for crypto companies, due to the limited selection of banks available to the industry. Just last week the FDIC, Fed and OCC coordinated a joint warning to banks about the liquidity risk that comes with banking crypto companies.
Issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices.
Business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector raise significant safety and soundness concerns.
Silvergate has been struggling for months. Laying off 40% of its workforce in January, the firm reported nearly $1 billion dollar net loss in the fourth quarter following a rush for the exits at the end of last year that saw customer deposits plummet 68% to $3.8 billion. To cover the withdrawals, Silvergate had to sell $5.2 billion dollars of debt securities.
Banks crushed today .. contagion fears ramping .. Silicon Valley Bank ($SVB) the catalyst today .. Silvergate yesterday. not a good sign. pic.twitter.com/dGZJjjcZwi— Brian Sullivan (@SullyCNBC) March 9, 2023