Silvergate Capital Corporation announced plans to “wind down operations” and liquidate its subsidiary Silvergate Bank. U.S. policymakers insist on stricter regulatory measures, and the crypto community accuses the government of using the banking sector to organize a crackdown against the crypto industry.
Silvergate Capital Corporation’s intentions to liquidate the crypto-friendly bank became known on March 8. Company representatives said that in light of “recent industry developments,” the voluntary liquidation of Silvergate Bank is “the best path forward.”
The bank’s liquidation plan calls for “repayment of all deposits.” The company is also prepared to make efforts to “resolve claims” from regulators. Apparently, it’s about assisting the U.S. Department of Justice in investigating transactions between Silvergate Bank and the bankrupt exchange FTX.
The company’s statement raised concerns from a number of American politicians, who began pushing for stricter regulation of the sector. They believe that banks that work closely with crypto companies and support cryptocurrency transfers are putting the country’s financial system at risk. Thus, according to Sherrod Brown, U.S. Senator from Ohio, the events surrounding Silvergate Bank signal the need to protect the financial system from the risks posed by cryptocurrencies, or rather “establish strong safeguards.” Elizabeth Warren, U.S. Senator from Massachusetts, agrees with him, also insisting on tougher regulatory measures.
Such statements from politicians provoked a wave of disapproval from the community, whose representatives accused the policymakers of being “irrational.” Caitlin Long, CEO of Custodia, said Silvergate Bank’s problems were directly related to banking, not crypto transactions.
Nic Carter, Co-Founder of Castle Island and Coin Metrics, wrote in his blog, “The Biden Administration is trying to ban crypto and using the banking sector to organize a sophisticated, widespread crackdown against the crypto industry.” In his view, banks are facing enormous pressure from the Federal Reserve (FED) and the Federal Deposit Insurance Corporation (FDIC) to simply refuse to open accounts for crypto startups. Carter also blames Silvergate Bank’s collapse on the government, which initiated legal audits and investigations against the bank.
According to Ram Ahluwalia, CEO of Lumida, the government is to blame for Silvergate Bank’s damaged credibility. He said the government deliberately denied the bank “due process.” This is what resulted in a crisis of confidence and partners leaving, prompting the liquidation of the bank by the parent company.
Recall that rumors about Silvergate Bank’s issues with U.S. regulators led LedgerX, Coinbase, Galaxy Digital, Paxos, Bitstamp, and other cryptocurrency companies to cut ties with the bank “out of an abundance of caution.”