Silvergate had been experiencing cash flow difficulties for some time. In just a few days, the company’s stock price plunged 60%. A situation that caused Silvergate to lose nearly a billion dollars, prompting a massive withdrawal from the crypto firms that collaborate with it. The circumstances are also such that the White House closely followed the evolution of the file.
The Downfall of a Crypto Industry Juggernaut
There is no longer any hope of saving Silvergate from its financial troubles. The company announced on Thursday March 9 that it has decided to put an end to its activities. This is undoubtedly another blow for the crypto industry. Indeed, Silvergate was so far the most prominent banking group among crypto companies. Several of them, such as Coinbase, Paxos, Circle, Galaxy Digital and CBOE, had a partnership with Silvergate. A collaboration that they massively decided to interrupt as the financial situation of the company was critical.
The crypto bank’s business report for the last quarter of 2022 reports a loss of nearly $1 billion. A financial disaster that would be linked to the bear market that the crypto industry is going through.
According to the leaders of the institution, these circumstances would have affected the capitalization of the company.
Should we look for the reasons for this collapse elsewhere?
For Sheila Bair, the reasons for the financial failures that led to the collapse of Silvergate would be elsewhere. The former head of the Federal Deposit Insurance Corporation (FDIC) notably mentioned problems related to the traditional banking system.
“Silvergate’s problems were as much, if not more, related to traditional banking risks like lack of diversification, maturity errors, as to its exposure to cryptos,” Bair said in an interview she gave to Bloomberg.
The question that now arises is how Silvergate will go about restoring all user deposits. Because in its press release the company specified that it would refund all the sums due to its customers. She was, however, evasive about how she intends to proceed.
One thing, however, is certain. It is that with the cessation of the activities of Silvergate, the Securities and Exchange Commission (SEC) will no longer refrain from cracking down. This, even if its regulatory approach has been strongly criticized in recent weeks.
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