Silvergate Bank bankruptcy. Investors will get their funds back, but how will this affect the cryptocurrency market?
Another significant cryptocurrency institution disappears from the market.
Silvergate Capital has been unable to cope with the string of recent setbacks that have been building up after FTX's collapse in November, and as a result, it has been announced that the banking institution will close down. The cryptocurrency bank will be liquidated soon, but first all investors will receive their deposits back.
This is the end of Silvergate
Cryptocurrency entities have been falling one by one like dominoes for several months. The slump in this sector continues, and last year's disasters, such as the collapse of Terra or FTX, only fueled the death of many companies in this industry. Now the well-known cryptocurrency bank Silvergate has declared its bankruptcy.
On March 8, Silvergate Capital Corporation announced that it had decided to liquidate the bank. As reasons for its decision, the financial institution cited "recent extremely unfavorable developments in the industry, the increasing amount of regulation and a number of high-profile bankruptcies". The company says its liquidation plan includes "full repayment of all deposits held by investors."
For several months, Silvergate had to face many adversities. After one of the world's largest cryptocurrency exchanges - FTX - collapsed in November, investors rushed in panic to withdraw funds deposited in the bank. Concerns have arisen that holding assets with intermediaries is an increasingly less secure solution.
Some time ago, the bank announced that it recorded a loss of USD 1 billion for the fourth quarter of 2022. In addition, there was the issue of numerous lawsuits from injured FTX investors. The bank was accused of complicity in money laundering that Sam Bankman-Fried embezzled from his platform.
Last week, the cryptocurrency company said it was increasingly concerned about whether it would survive this year. Moreover, a letter was sent to the US Securities and Exchange Commission (SEC) informing the institution that the bank is significantly delayed in preparing its annual report. In addition, they also disabled a key feature - the Silvergate Exchange Network - allowing users to make real-time money transfers. This product was a key element of the bank's offer for cryptocurrency entities.
As a result of this information, the company's shares on the stock exchange began to fall by as much as 50%, and its key partners decided to end cooperation with the bankrupt bank. Cryptocurrency giants such as Coinbase, BitStamp, Paxos, Gemini and Galaxy Digital have severed their partnership with Silvergate.