Major blow to crypto landscape as cornerstone bank collapses
In a significant development for the crypto world, Silvergate Bank, a key player in the space, has announced that it is closing and returning deposits. The bank’s holding company, Silvergate Capital Corporation, revealed that it made the decision to shut down “in light of recent industry and regulatory developments.”
Struggles in Recent Months
This news comes after the company’s struggles in recent months, with its earnings report revealing that it lost a billion dollars in one quarter after its customers withdrew $8.1 billion. The bank had been facing difficulties, alongside some of its most prominent clients, such as FTX and Genesis.
Serious Concerns about the Future
The closure of Silvergate Bank has raised several concerns about the future of the crypto landscape, particularly regarding where companies will turn to for cash. With the loss of a regulated institution like Silvergate, there is a risk that crypto companies may turn to less regulated institutions, potentially making the space even riskier for all involved.
Impact on the Crypto Industry
Amidst all of this, firms such as Coinbase, Crypto.com and Paxos have already begun to distance themselves from the bank. Even the Tether stablecoin has distanced itself from the institution. With its list of allies thinning and the government scrutinizing it for its role in the FTX meltdown, Silvergate’s collapse will undoubtedly have a significant impact on the crypto industry.
Next Steps for the Bank
Silvergate Bank’s next steps involve an orderly liquidation process that adheres to relevant regulatory procedures. Additionally, the bank is exploring the best course of action to address claims and safeguard the remaining value of its assets, including proprietary technology and tax assets. The bank has already taken steps to shut down its Silvergate Exchange Network, which had facilitated the movement of funds between crypto exchanges and other institutions.
Scrutiny from Lawmakers
Lawmakers, especially those worried about the spillover of the crypto industry into traditional finance, are likely to scrutinize the bank’s collapse. Senator Sherrod Brown (D-OH), who chairs the Senate Banking, Housing, and Urban Affairs Committee, shared his thoughts on the matter, warning that the bank’s reliance on a volatile and high-risk sector such as cryptocurrencies can lead to dire consequences. He has long been worried about the involvement of banks in the crypto space, arguing that it spreads risk throughout the financial system, with taxpayers and consumers ultimately paying the price.
Conclusion
Overall, the collapse of Silvergate Bank is a major blow to the crypto world, and it remains to be seen what impact it will have on the industry in the long term. With concerns about where companies will turn to for cash and the potential for increased risk in the space, it is clear that this is a significant development that will be closely watched by those in the crypto community and beyond.
