- Silvergate Bank must file a self-liquidation plan with California regulators within 10 days.
- Bank’s failure connected to dealings with the now defunct crypto exchange FTX.
- Silvergate’s voluntary agreement includes a freeze on senior executive bonuses and promotions.
Signaling a remarkable shift in the crypto banking sector, Silvergate Bank has aligned with a Federal Reserve order to formulate a self-liquidation strategy. As per the instruction, the bank is to submit this plan to California’s financial overseers within a 10-day framework.
This move manifests as part of the methodical procedure to halt the crypto-friendly bank’s operations based in California, preserving cash and additional resources to ensure depositor indemnity.
The resolution to liquidate the bank’s assets hinges upon the approval of the California Department of Financial Protection and Innovation. Notably, an extension on the deadline for this plan may be granted. Earlier in March, Silvergate had foreshadowed the cessation of operations due to its business failure.
A comprehensive examination conducted by state regulators and officials from the Federal Reserve Bank of San Francisco identified manifold deficiencies in Silvergate Bank’s operations. The most glaring of these revolved around both safety and soundness, and adherence to banking laws and regulations. The bank’s downfall is linked, in part, to its association with the now-dissolved crypto exchange FTX.
Facing dwindling deposits from its crypto-asset-related clients, predominantly due to the collapse of FTX Trading Ltd. and Alameda Research LLC, Silvergate Bank momentarily survived by securing a multi-billion dollar emergency loan. However, the repercussions of this business strategy associated with the digital asset industry, combined with a bank run, resulted in significant funding and liquidity stress on the bank.
Silvergate’s leadership has displayed unanimous agreement with all aspects of the enforcement action. The implications of this include that any bonuses, promotions, or severance payments for senior executives necessitate regulatory approval.
Despite the imminent cessation of operations, the story of Silvergate Bank serves as a crucial learning curve for the crypto banking sector. With an emphasis on enhanced safety, soundness, and rigorous regulatory compliance, Silvergate’s legacy could potentially inspire the development of more resilient and sustainable crypto-banking models in the future.
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Antonella is a cryptocurrency and news writer who travels the world, finding inspiration in diverse cultures. She cherishes moments sitting on the beach, watching sunsets. Through her writing, Antonella explores the dynamic realm of cryptocurrency and delivers insightful news. Her work encapsulates both the excitement of finance and the serenity of nature’s beauty.
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