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Silvergate Bank Shuts Down Its Operations – Customer Deposits Will Be Fully Repaid

Author

Jonathan Gibson

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Reading time

3 mins
Last update

Author

Jonathan Gibson

Tags

Reading time

3 mins
Last update

Author

Jonathan Gibson

Tags

Reading time

3 mins
Last update

Silvergate

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Silvergate Bank, one of the largest crypto-friendly banking institutions, announced that it will be undergoing liquidation. This comes as the cryptocurrency industry continues to be in a bear trend that affected multiple projects, institutions and digital assets. In addition to it, the bank informed the community that deposits will be fully repaid. 

Silvergate Bank Shuts Down Operations

Silvergate Bank has announced that they are winging down their operations and voluntarily liquidating the bank. The information was released in a press release a few hours ago and explained that they are considering how to best preserve the residual value of their assets. Now, they are shutting down their operations in an orderly manner and following all the applicable regulatory processes and requirements. 

The company explained that this decision comes in light of the recent industry and regulatory developments. Nevertheless, they do not mention anything about which were the details related to this issue. Furthermore, they consider that stopping the operations is the best decision in order to continue from now on. 

The Bank is also now considering how to best resolve claims and preserve the residual value of the assets. There are other things to take into consideration such as proprietary technology and tax assets. Right now, Centerview Partners LLC is working as a financial advisor, Cravath, Swaine & Moore LLP is acting as a legal advisor. Finally, Strategic Risk Associates is assisting with the current transition. 

The press release reads as follows:

“Silvergate Bank made a decision to discontinue the Silvergate Exchange Network (SEN), which it announced on March 3, 2023 on its public website. All other deposit-related services remain operational as the Company works through the wind down process. Customers will be notified should there be any further changes.”

Therefore, we see the bank will continue with the Silvergate Exchange Network (SEN), which was already announced earlier this month. Additionally, customers will receive notifications regarding future changes and possibly other information related to this case. 

Financial Institutions in the Cryptocurrency Industry

Traditional financial institutions have had a difficult time getting into the cryptocurrency industry. Indeed, crypto companies lacked the necessary support from banks and other financial firms in order to offer better and more reliable products and services to users and clients. This decision to shut down its operations by Silvergate shows the complexity of the current regulatory system when it comes to cryptocurrencies and traditional financial institutions. 

The liquidation of Silvergate Bank highlights the challenges that exist for financial institutions seeking to enter the cryptocurrency industry. While the crypto industry has grown rapidly in recent years, there are still a number of regulatory hurdles that must be overcome. 

This is particularly true for banks, which are subject to a range of laws and regulations designed to prevent money laundering, terrorist financing, and other financial crimes. As a result, many banks have been reluctant to provide banking services to cryptocurrency companies, which has made it difficult for these firms to operate and grow.

At the same time, the liquidation of Silvergate Bank is also a reminder of the risks that exist in the cryptocurrency sector. While the industry has seen a great deal of growth in recent years, it is still relatively new and untested. As a result, there are many unknowns and uncertainties that must be navigated. 

This includes risks related to security, volatility, and market adoption. Moreover, the regulatory landscape is constantly changing, which can make it difficult for companies to stay compliant and avoid legal and regulatory issues.

Despite these challenges, the cryptocurrency industry continues to grow and evolve. As more companies and institutions enter the space, there is a growing need for better infrastructure, products, and services. This includes improved custody solutions, payment systems, and regulatory frameworks.