The US Federal Reserve has issued a consent order to Silvergate and its parent company as part of the institution's "cease operations" and liquidation plan.
In a June 1 notice, the Fed said Silvergate Capital Corporation and the bank would have 10 days to file a self-liquidation plan that complies with California and federal requirements to wind up their operations. The company announced in March that it planned to close operations “In light of recent industry and regulatory developments,” becoming one of three crypto-friendly banks to close.
While Silvergate voluntarily declared liquidation and plans to “repay all deposits in full,” the Fed's notice said the bank's inspections “discovered numerous deficiencies” following the collapse of cryptocurrency exchange FTX in November 2022. According to the Fed, Silvergate "experienced a significant decline in deposits from its crypto-asset-related clients in the fourth quarter of 2022," resulting in "funding and liquidity pressures." Any Silvergate self-liquidation scheme will prioritize the protection of depositors' funds. Federal Reserve officials and the California Department of Financial Protection and Innovation will monitor and approve any plan proposed by Silvergate. In addition, regulators have restricted Silvergate's leadership's ability to receive "golden parachute payments"and change responsibilities during the winding-up process.
Silvergate was the first major crypto-friendly bank to close operations, followed by Silicon Valley Bank and Signature Bank. A number of digital asset firms including Coinbase, Paxos, Gemini, Bitstamp and Galaxy Digital previously had financial ties to Silvergate an announced they were leaving after The bank was accused of being involved in the FTX debacle.
