New York (CNN) Crypto-focused lender Silvergate said it is winding down operations and will liquidate the bank after it has been financially ravaged by digital asset turmoil.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind-down of banking operations and a voluntary liquidation of the bank is the best way forward,” it said in a statement Wednesday.
The bank’s plan includes “full repayment of all deposits,” he said.
The collapse of Silvergate is a rare example of cryptocurrency volatility seeping into the mainstream banking system. The bank is a traditional, federally insured lender that positioned itself as a gateway to the digital asset space.
So far, however, there appears to be little risk of the Silvergate turmoil spreading to other banks, said Dave Weisberger, the CEO of CoinRoutes, an algorithmic trading platform.
“The problems Silvergate faced were primarily due to inadequate risk management, particularly an overreliance on volatile short-term deposits while extending loans or investments for longer maturities,” said Weisberger. “This is not like the collapse of FTX, where investors lost their deposits, but rather an orderly dissolution.”
Silvergate’s stock is down 97% from its November 2021 high — a decline that mirrors that of the broader crypto market. A series of bankruptcies and scandals in 2022, including the stunning implosion of Sam Bankman-Fried’s business empire in November, have rocked the crypto industry.
Once valued at $3 trillion, the entire market is now worth about $1 trillion.
Wednesday’s announcement comes a week after Silvergate delayed its annual filing with the Securities and Exchange Commission, warning it could face bankruptcy. That news prompted the bank’s largest crypto industry clients, including Coinbase and Paxos, to withdraw their deposits.
The La Jolla, California-based lender reported a $1 billion loss for the fourth quarter as investors panicked over FTX’s collapse.
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