Silvergate Announces Voluntary Liquidation: What Does it Mean for Bitcoin?

Following the collapse of FTX – and the subsequent inquiries into just how much Silvergate knew about the business dealings of the FTX Group – trouble began brewing for the bank.

Looming Trouble

These troubles only began compounding. First, Silvergate announced that they would be delaying the results of their K-10 report by several weeks, raising concerns among investors.

Shortly after this announcement, other crypto heavy-hitters like Coinbase and Kraken announced that they will also be taking their business elsewhere.

Warning signs continued to pop up as recently as last week, with Silvergate announcing that they are shuttering their crypto payment network, one of the bank’s main selling points for crypto exchanges. At the time, it wasn’t yet clear whether the bank was simply pivoting to a different clientele or winding down.

However, as confirmed by a press release launched by the company today, Silvergate’s intention to shutter its doors and begin a voluntary liquidation has become official.

Orderly Wind Down Of Operations

Unlike the implosions of their former business partner, who may have had a significant role in Silvergate’s subsequent collapse, the bank has stressed that all customer deposits are to be paid in full.

Although Silvergate was allegedly in big trouble, they were not yet bankrupt. However, due to actions taken recently by regulators, Silvergate leadership felt that winding down operations while still, solvent was a better option than attempting to make a comeback.

“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind-down of Bank operations and a voluntary liquidation of the Bank is the best path forward.”

At the time this statement was released, Silvergate was already facing inquiries launched by members of Congress, as well as investigations by the Federal Reserve and the California Department of Financial Protection and Innovation.

More information will follow on how Silvergate plans to resolve claims from investors and preserve the residual value of their assets, which include tech developed in-house and “tax assets.”

Silvergate’s wind-down will be supervised by financial advisor Centerview Partners LLC, as well as law firm Cravath, Swaine & Moore LLP.

The liquidation of Silvergate will leave Signature Bank as the main traditional bank known for handling crypto-related clients. Only time will tell if Signature will swoop in and scoop up the majority of crypto platforms as clients or if crypto platforms decide to move towards stablecoins as a store of value.

It’s important to note that this is a voluntary liquidation and not a bankruptcy, implying that Silvergate will have no issue making its creditors whole. Therefore, it’s also unlikely that this will impact Bitcoin in such a negative way compared to the FTX fiasco or the Luna-UST crash. However, the effects are already visible, as volume has dried across the board and market participants remain reluctant to step in.