Silvergate Bank, a major traditional bank that handled crypto-related clients, has announced that it will be voluntarily winding down operations and beginning a liquidation process. This comes after the bank faced inquiries from Congress, the Federal Reserve, and the California Department of Financial Protection and Innovation. Silvergate has reassured customers that all deposits will be paid in full. The bank has also stated that they believe this is the best path forward in light of recent industry and regulatory developments. Financial advisor Centerview Partners LLC and law firm Cravath, Swaine & Moore LLP will be supervising the process.
The liquidation of Silvergate will leave Signature Bank as the main traditional bank for crypto-related clients. It remains to be seen if Signature will be able to take on the majority of crypto platforms or if crypto platforms will move towards stablecoins. The effects of the liquidation are already visible, as volume has dried up and market participants are hesitant to step in. However, it is unlikely that this will have the same negative impact on Bitcoin as the FTX fiasco or the Luna-UST crash, since Silvergate is conducting a voluntary liquidation and will have no issue making creditors whole.