Cryptocurrency-friendly bank Silvergate has fired the first shot in the US banking crisis. In March of this year, the bank announced voluntary closure and liquidation, emphasizing that all customer deposits would be fully reimbursed. This commitment was fulfilled on Wednesday (22nd), as Silvergate Capital announced that it has fully repaid all remaining deposit liabilities, except for small amounts under $10,000. This repayment does not pose any risk to the deposit insurance fund of the Federal Deposit Insurance Corporation (FDIC). This is part of the orderly and voluntary liquidation process carried out by the bank in accordance with applicable regulatory procedures.
Silvergate stated that after repaying all deposits, the company still has excess cash and cash equivalents. However, it also faces potential liabilities from lawsuits, regulatory affairs, and investigations, which prevent it from guaranteeing sufficient capital and reserves during the bank’s liquidation period.
This news is related to the challenges faced earlier this year by Silvergate Capital, which became the first US regional bank to close due to the collapse of the cryptocurrency industry. The collapse of FTX cryptocurrency exchange caused huge losses, leading them to decide on voluntary liquidation in March.
Prior to this, the bank reported quarterly losses of up to $1 billion, mainly due to investors withdrawing over $8 billion in deposits. This series of events reflects the challenges faced by financial institutions operating in the cryptocurrency market, as well as the vulnerability of US regional banks under extreme market pressure.
FDIC had previously intervened
Before bankruptcy, the Federal Deposit Insurance Corporation (FDIC) had intervened and discussed ways to avoid closure with bank management. However, Bloomberg reported that under the pressure of regulatory supervision and criminal investigations by the US Department of Justice Fraud Investigation Division into its transactions with FTX and Alameda Research, the bank was unable to recover from its difficulties. Although no misconduct was alleged on the part of the bank, Silvergate Capital announced voluntary closure and liquidation in March.
Following this, Silicon Valley Bank, Signature Bank, and First Republic Bank, all US regional banks, also closed one after another due to a surge in customer withdrawals, causing widespread market concern.