Silvergate had established a reputation as the US's largest crypto-focused bank, with customer deposits of up to $14 billion. But the combination of the Federal Reserve's aggressive interest-rate hikes and FTX's collapse in November cast a shadow over its future.
Silvergate had also been a key financial institution for the now-bankrupt exchange FTX and its sister trading firm Alameda Research, with FTX clients wiring the bank money directly when depositing funds.since FTX's collapse. Unaudited financial statements covering the fourth quarter of 2022 showed that Silvergate held just $4.6 billion of cash as of December 31.
"I've been concerned that when banks get involved with crypto, it spreads risk across the financial system and it will be taxpayers and consumers who pay the price."scrambled to cut ties with the bank. It then closed its Silvergate Exchange Network, a major payments network hub for the crypto industry that was a key attraction for depositors.
"Fears are growing that a crypto-focused bank failure could constitute a new hit to investors' confidence after the bankruptcies of major crypto players during the last few months," Makarem told Insider last week.