The Rise and Fall of Silvergate’s Crypto Business

The Rise and Fall of Silvergate’s Crypto Business

by Virtusenews
6. March 2023
The Rise and Fall of Silvergate’s Crypto Business

The bank’s own data shows the rapid acceleration of its novel crypto-banking business and how leaning into digital assets made it vulnerable to the industry’s drama.

Silvergate Bank lost more than $8 billion in deposits from its crypto customers in the final months of 2022 as its core block of business crumbled under the industry’s implosion – just as the bank’s regulators had predicted might happen for such institutions.

The sudden evaporation of most of its deposit base was only one of several worries for the La Jolla, California-based lender. The company has faced pressures from U.S. banking watchdogs that have been insisting that banks shouldn’t concentrate on crypto, and its disclosures this week revealed investigations from regulators and the U.S. Department of Justice, plus a suggestion that ongoing audits may require a restating of its financials.

Apart from all that, its one-time crypto strengths were starting to drag it down, according to a CoinDesk analysis of the bank’s financial reports over the past several years.

Silvergate exchange network

Many of the raw numbers reported by Silvergate over the years reveal an institution that may have peaked in 2021, well before the dramas of 2022 shook the crypto sector. The volume on its Silvergate Exchange Network, for instance, hit a high in the first half of 2021, with $406 billion in transfers, which slid to $230 billion by the second half of 2022.

And the bank’s overall asset size also reached a high point in the fourth quarter of 2021, at $16 billion. Its most recent report showed it at $11.4 billion.

Even the high point of its assets describe a very small bank – the scale of a mid-range community bank – despite its outsized reputation as a core part of the digital assets industry’s U.S. banking presence. A near equivalent for its size in California would be the slightly larger Farmers and Merchants Bank of Long Beach, according to state banking data.


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