Silvergate Crypto-Friendly Bank Announces Cessation of Operations

Silvergate Bank has decided to stop operating. (Photo; Doc. Crypto News)

JAKARTA - Silvergate Bank, known as a bank specializing in providing USD trading services for many of the leading cryptocurrency exchanges in the US, announced that it will "voluntarily liquidate" depositors of the bank's assets and reduce its operations.

This step was taken following various liquidity and legal issues facing the bank in relation to its relationship with the FTX crypto exchange, which went bankrupt in 2022.

According to a statement by Silvergate Bank, "Given recent industry and regulatory developments, Silvergate Bank believes that regular shutdown of Bank operations and voluntary liquidation of Banks is the best path forward." However, this announcement caused many crypto companies that were still Silvergate customers to immediately cut ties with the bank unilaterally.

In its official announcement, Silvergate Bank stated that the Bank's dissolution and liquidation plan includes full payment of all deposits. "The company also considers the best way to settle claims and maintain the residual value of its assets, including owned technology and tax assets."

This bank closure affected several major companies in the crypto industry, including Circle and Coinbase, which were forced to discontinue the inter-crypto exchange network called SEN. These companies cut ties with Silvergate Bank following information about the liquidity and legal issues facing the bank.

Silvergate Bank's move to liquidate voluntarily saw bank SI shares hit a record low, falling 5.76 percent on Wednesday, March 8 to USD 4.91 (around IDR 75.801), marking a 71.56 percent year-over-year drop.

The bank was previously a leading figure in the crypto market, bringing crypto assets to the forefront of USD 2.1 billion (IDR 32.4 trillion) in September 2020. However, a recent survey shows that there are hidden holes in business management in a regulated market loose.

Uncertain market conditions and recent regulations have led many US financial institutions to simultaneously warn banks about the risks of providing services to companies with exposure to the cryptocurrency sector.

In this situation, Silvergate Bank's move to liquidate voluntarily was seen as the right action to maintain the continuity of the company's business. However, this bank still faces many challenges to settle claims and maintain the residual value of its assets.