The Biden administration is “aware of the situation” at Silvergate and will continue to monitor reports about the troubled bank as it unfolds, a White House spokesman said.
At a press briefing on March 6, press secretary Karine Jean-Pierre said the White House has noted that Silvergate has flagged another major crypto company to be “experiencing significant difficulties” in recent months, but declined to go into further details about the company.
“In recent weeks, banking regulators have released guidance on how banks should protect themselves against crypto-related risks,” she said, adding that:
“This is a president who has repeatedly called on Congress to take action to protect ordinary Americans from the risk of digital assets and he will continue to do so. We will not talk to this particular company as we have not done with any other cryptocurrency companies, but we will continue to monitor reports.”
Known as a “crypto bank”, Silvergate has been a major banking partner of a number of major crypto companies and projects.
However, uncertainty about the bank’s solvency began to mount in early March after Silvergate delayed the filing of its annual 10-K report by two weeks. A 10-K report is a legally required document that provides a comprehensive overview of a company’s business and financial condition.
Following that news, Coinbase announced on March 2 that it had ended its partnership with Silvergate, as the crypto exchange also hinted at concerns about the Justice Department’s investigation into the company’s involvement in the collapse of FTX.
At Coinbase, all customer funds remain safe, accessible and available.
In light of recent developments and as a precaution, Coinbase is no longer accepting payments to or from Silvergate.
— Coinbase (@coinbase) March 2, 2023
Several crypto heavyweights promptly followed suit by cutting ties or distancing themselves from the bank, including Circle, Paxos, Bitstamp, Galaxy, MicroStrategy, and Tether to name a few.
On March 4, Silvergate also announced that it would close its digital asset payment network Silvergate Exchange Network due to “risk-based” concerns, adding further uncertainty to the company’s financial condition.
Related: Investor concerns remain as crypto investment products see 4th week of outflows
As a result, Silvergate’s share price (SI) has plummeted about 60% since March 1, while crypto’s total combined market capitalization has fallen about 5.5% to $1.072 trillion over the same period.
Speaking to CNBC in March. 6, economist and author of the Crypto is now Macro newsletter Noelle Acheson, suggested that if Silverbank were to file for bankruptcy, it could give regulators a much bigger excuse to crack down on crypto than before, given the bank’s ties to traditional finance.
“So far we have been able to say that the repercussions of everything that happened last year fell within the crypto industry – painful, but controlled,” said Acheson, adding:
“If Silvergate goes bankrupt, the regulators can say ‘aha, systemic risk, we told you that.’ That will give them even more ammunition to go after crypto and increase their choke on fiat access for crypto companies.