Silvergate Bank

Silvergate Bank is a Californian bank that mostly deals in cryptocurrency transactions.

Concerns have been raised about Silvergate's health following the fall in cryptocurrency prices and the bankruptcy of FTX in 2022.

History

Silvergate Bank was co-founded as a savings and loan association in 1988. In 1996 Silvergate was re-capitalized and reorganized into a bank by Dennis Frank and Derek J. Eisele, but it initially remained quite small with only 3 branches in southern California. It is now led by CEO Alan Lane and president Ben Reynolds, although Mr Eisele remains on the leadership team as chief credit officer.

In 2013, CEO Alan Lane personally invested in Bitcoin, and Silvergate launched an initiative to start serving cryptocurrency clients. After this, the bank grew rapidly, reaching $1.9 billion in assets and 250 clients by 2017. The company became public in November 2019 at a share price of $13, and by November 2021 the price had risen by 1,580% to $219 due to the cryptocurrency bubble at the time.

The bank operates a real-time payments system called the "Silvergate Exchange Network" (SEN), which enables cryptocurrency exchanges, institutions, and customers to exchange fiat currencies such as US dollars and Euros. Silvergate is thought to be the first regulated bank to develop this sort of payment system. By the third quarter of 2022 it had $12 billion in deposits from 1,677 "Silvergate Exchange Network" (SEN) customers including all major cryptocurrency exchanges and over 1,000 institutional investors.

In 2021, Silvergate started trying to launch its own US dollar stablecoin, and in January 2022, Silvergate acquired Meta's Diem technology for around $200 million to assist with this (Silvergate was originally intended to be a key issuer of the Diem currency for Meta). As of late 2022, the stablecoin has still not launched.

In late 2022 — following a fall in cryptocurrency prices and the collapse of many cryptocurrency exchanges and schemes such as FTX — concerns were raised about potential impacts on Silvergate due to loss of deposits and credit exposure from SEN leverage, as well as potential impacts of Silvergate's issues on the wider cryptocurrency ecosystem due to Silvergate's key role in it. Some short sellers raised the prospect of a bank run. The share price of Silvergate has fallen 89% from its November 2021 all-time-high to $25, and its deposits have fallen to $9.8 billion. Silvergate has claimed that it has adequate liquidity, and that it only held FTX deposits and was not exposed to FTX via lending. Senators Elizabeth Warren, Roger Marshall, and John Kennedy requested that the bank explain its relationship to FTX in December 2022. By December 2022 deposits at Silvergate had fallen to $3.8 billion.

See also

* Bankruptcy of FTX

References

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1988 establishments in California
Financial services companies established in 1988
Cryptocurrency companies
Banks of the United States
Companies listed on the New York Stock Exchange