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What Silvergate Bank shutting down means for crypto businesses

Lee Cocking
Post by Lee Cocking
March 6, 2023
What Silvergate Bank shutting down means for crypto businesses

Blog Updated: March 8th - Reflect recent Silvergate announcement that the bank will be shutting down its operations entirely.

Who is Silvergate Bank?

Silvergate Bank is a US-based financial institution that specializes in serving the needs of the digital currency industry. Founded in 1988 and headquartered in La Jolla, California, the bank has become a leading provider of financial services to crypto-related businesses, including exchanges, OTC trading desks, and institutional investors.

What is the Silvergate Exchange Network?

One of the key services offered by Silvergate Bank was the Silvergate Exchange Network (SEN), a proprietary payment network that facilitated instantaneous transfers of US dollars between participating exchanges and their clients. SEN was designed to simplify the process of depositing and withdrawing funds from exchanges, reducing the friction and delays that can be associated with traditional banking systems.

What was announced about the Silvergate Exchange Network?

Silvergate bank announced on March 8, 2023, that it will wind down operations and liquidate its bank. This is a significant shift from the previous announcement made on March 3, 2023, where the company suspended its payments platform known as the Silvergate Exchange Network (SEN), which was considered to be one of its core offerings. At that time, Silvergate had clarified that all other deposit-related services remain operational as the company works through the wind-down process.

According to the latest announcement, all deposits will be fully repaid, as per a liquidation plan shared on Wednesday afternoon. However, it is unclear how the crypto-friendly bank plans to resolve claims against its business. The company's stock is down more than 25% in after-hours trading.

Silvergate's decision to shut down the bank entirely is in response to recent industry and regulatory developments, as per the company's statement. The delayed filing of its annual 10-K for 2022, announced last week, was also partly due to an imminent regulatory crackdown, including a probe already underway by the Department of Justice.

The wind-down process will be overseen by Centerview Partners, acting as Silvergate's financial advisor, and Cravath, Swaine & Moore, providing legal services. This announcement comes as a surprise to many in the crypto industry, as Silvergate had been a key player in the space. Its liquidation will likely have an impact on the broader crypto market, and customers of the bank will be notified should there be any further changes.

As of March 3 2023, Silvergate Bank made a risk-based decision to discontinue the SEN network. For users of the SEN network, this decision means that they will no longer be able to enjoy the fast, efficient payment processing that SEN offered. The list of Silvergate's present and past customers includes many of cryptocurrencies biggest companies:

  • Coinbase
  • Bitstamp
  • Gemini
  • Kraken
  • BitGo
  • Paxos
  • Anchorage
  • Genesis Global Trading*
  • BlockFi*
  • Celsius Network*
  • Binance.US
  • Bitso
  • River Financial
  • FTX*
  • Bitcoin IRA

    * Liquidity issues in 2022

How does this impact the crypto industry?

Silvergate Capital Corp's decision to discontinue banking operations is a significant development for the crypto industry. While it is unclear exactly why the bank made this decision, it is likely to have a significant impact on the way that exchanges and users process US dollar transactions. As the cryptocurrency industry continues to evolve, it will be important to monitor how these changes unfold and adapt to new regulatory and market conditions.

How do companies minimize the impact to their operations?

Many smaller, less well-known companies in the crypto space have turned to Silvergate Bank to access critical banking services, such as deposit accounts, wire transfers, and other payment-related services. With the recent news, Cybrid invites all companies affected by the news to come build on our premium digital finance platform. With best-in class banking relationships our platform can provide access to KYC/KYB onboarding, FBO accounts, ACH/EFT transfers, fiat to crypto onramp, wallets with deposit and withdraw capability,  crypto to fiat offramp; a complete crypto service.

Our leadership and team have built national financial infrastructure solutions in the past, so we understand the additional securities demanded by the mainstream banking system. Learn more about our team here.

Download: 3-Step Guide

Lee Cocking
Post by Lee Cocking
March 6, 2023
Lee Cocking, the accomplished Head of Product at Cybrid, is a highly-regarded expert in product management and a driving force in the blockchain industry. With his extensive experience and deep understanding of blockchain technology, Lee provides thought leadership and guidance that shape the development of Cybrid's innovative product offerings. In addition to his wealth of product management knowledge, Lee shares valuable insights on the evolving landscape of blockchain and its potential to revolutionize various industries. His expertise and passion for the technology help to ensure that Cybrid remains at the forefront of the market, delivering cutting-edge solutions that address the unique needs of clients in the ever-changing world of digital assets.