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- Silvergate Bank successfully navigated the challenges posed by the FTX bankruptcy.
- The Bank has committed to presenting a self-liquidation strategy to authorities within 10 days.
Silvergate Bank, recognized for its supportive stance towards cryptocurrency, has committed to presenting a self-liquidation strategy to California banking regulators within 10 days, representing a significant development for the cryptocurrency industry.
Following the Federal Reserve Board’s consent decree against Silvergate Capital Corporation and Silvergate Bank, issued on March 8, 2023, the bank has opted to voluntarily liquidate its assets. While an extension of the deadline is a possibility, the self-liquidation plan must still receive approval from the California Department of Financial Protection and Innovation.
Numerous Deficiencies Identified During Assessment
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This indicates that the bank must prudently manage its cash reserves and any other available resources to ensure full reimbursement to depositors. The bank had previously indicated that it would be shutting down due to financial challenges.
Recently, Silvergate Bank underwent scrutiny by state regulators and officials from the Federal Reserve Bank of San Francisco. The resulting consent order from the Federal Reserve highlights several “deficiencies” identified during the evaluation.
These issues encompass a failure to comply with banking regulations and safety and soundness concerns. Particularly significant is the order’s linkage of the bank’s downfall to its ties with the bankrupt FTX cryptocurrency exchange.
Silvergate Bank managed to endure the difficulties stemming from the FTX bankruptcy and the devaluation of Diem, a digital asset associated with Facebook.
The Federal Home Loan Bank of San Francisco extended an emergency loan of billions of dollars to the bank, which was both atypical and controversial. This prominent institution, established by the government to support mortgage lending in the United States, provided the bank with essential short-term relief.
