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According to a Tuesday report, Silvergate Bank, until recently one of the largest crypto-friendly banks in the US, is in seeking ways to save itself in cooperation with FDIC. Silvergate has been facing an increasing number of issues since the collapse of FTX and has recently even discontinued its Exchange Network for cryptocurrency companies.
Silvergate Working with FDIC as Bank’s Future Existence is Questioned
According to a March 7th report, Silvergate bank is actively working with the Federal Deposit Insurance Corporation in an effort to weather the storm it is currently facing. The bank has been under increasing pressure for months since the fall of Sam Bankman-Fried’s cryptocurrency empire in November 2022.
Reportedly, FDIC examiners have been dispatched to Silvergate’s headquarters in La Jolla, California, and are currently assessing the situation. Allegedly, one of the ways out that is being considered is to seek help from the bank’s former partners from the cryptocurrency sector to help with its liquidity.
Despite the development, Silvergate is yet to reach a decision on how it will handle the crisis. Furthermore, the bank is currently reevaluating its future viability and may not even remain operational. On the other hand, the involvement of the FDIC does not necessarily mean that Silvergate will not be able to find a way out without federal involvement.
Silvergate’s Downward Spiral
Silvergate Bank found itself under increasing pressure immediately after Sam Bankman-Fried’s cryptocurrency exchange FTX filed for bankruptcy last November. The deterioration of the company’s health became evident early in 2023 after a bank run worth more than $8 billion was revealed, and things have been taking one turn for the worse after another ever since then.
In early February, rumors of a Department of Justice probe into the bank over its involvement with FTX and Alameda Research started circulating. By the middle of the month, Silvergate’s shares became the second-most shorted in the United States. Finally, last week, the bank entered into what may prove to be its death spiral.
Silvergate’s shares dropped more than 50% in 24 hours after the bank revealed it would not be able to make its 10-K filing until further notice. The company also disclosed it is reevaluating its future viability both due to the fallout from FTX, and likely regulatory, Congression, and DoJ investigations. A day later, most of the bank’s partners from the digital assets industry announced they would be ending the cooperation.
Do you think Silvergate will be forced to shut down? Let us know in the comments below.