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Crypto bank Silvergate Capital's stock is down about 47% since the news about FTX started to break, and there is chatter that Silvergate could be facing a run. Its Silvergate Exchange Network (SEN) operates as a real-time dollar and euro payments network for crypto exchanges and institutions (see graphic below). At the end of the third quarter, Silvergate had 1,677 customers, including all of the major crypto exchanges and more than 1,000 institutional investors, using SEN and about $12 billion of non-interest-bearing deposits. Silvergate doesn't charge clients fees to use the SEN network so its main source of revenue is the carry on those deposits. What's probably driving the stock decline are investor concerns about deposit outflows from its exchange clients, as the crypto market slows down, including roughly $1.2 billion from FTX. However, Silvergate has a highly liquid balance sheet. At the end of the third quarter, the bank had nearly $1.9 billion of cash and cash equivalents and another $8.3 billion of available-for-sale securities that can be quickly converted into cash. Also, as a federally regulated bank, Silvergate could also tap the Federal Home Loan Bank or the Federal Reserve. Nevertheless, the situation bears watching.

Silvergate Bank will "voluntarily liquidate" its assets and wind down operations. The bank was under fire after announcing it would have to delay filing its annual 10-K report due to questions from its independent auditors and accounting firm over its figures. "In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward. The Bank's wind down and liquidation plan includes full repayment of all deposits." https://ir.silvergate.com/news/news-details/2023/Silvergate-Capital-Corporation-Announces-Intent-to-Wind-Down-Operations-and-Voluntarily-Liquidate-Silvergate-Bank/default.aspx

"Silvergate Bank, the US dollar banker to the crypto world, is having issues. The latest red flag: Silvergate is unable to file its 10-K annual report for 2022 on time, and it won't even be able to meet an extended March 16 deadline. In a late filing notice to the SEC, the California bank said it was not sure it could survive as a "going concern." Silvergate is toast. We suspect the FDIC will be swooping in sooner rather than later to sell the bank or liquidate its assets."

"Silvergate Bank, which warned this week about its ability to remain in business, discontinued its SEN platform that institutions used to move money to crypto exchanges. "Effective immediately Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN)," the company said on its website Friday. "All other deposit-related services remain operational.""

Silvergate Bank, a crypto-friendly lender that counts major crypto exchanges like Coinbase and Kraken as clients, is expanding its SEN Leverage service. The product, which was first launched in 2017, allows the bank's customers to obtain US dollar loans collateralized by their bitcoin holdings at some crypto exchanges that Silvergate is currently serving. To do so, Silvergate partnering with the digital asset custodian Anchorage, which recently raised $40 million in a Visa co-led series B fundraising.

Clients of Silvergate, the popular San Diego-based bank known for servicing cryptocurrency firms, reported issues with certain money wires to the firm. Silvergate CEO Alan Lane said wiring issues were tied to an outage by its payment processor, Finastra, which sits between Silvergate and Fedwire, the real-time settlement network that connects the country's banks.

Silvergate Capital no longer plans to launch its own payments-focused, dollar-pegged stablecoin this year. Company executives said the delay is related to regulatory compliance, not technical issues, underscoring that the technology was ready when Silvergate acquired it from Diem.

Silvergate Bank confirmed that it's purchasing Diem's development, deployment and operations tools, as well as tools "for running a blockchain-based payment network" for remittances and other applications. The Diem Association, the stablecoin project from Meta Platforms, will "begin the process of winding down" both the group and its subsidiaries over the next few weeks. Silvergate Bank described Diem's work as running "in a pre-launch phase." Silvergate CEO Alan Lane said they hope to launch a stablecoin by the end of this year.

Silvergate Bank confirmed that it's purchasing Diem's development, deployment and operations tools, as well as tools "for running a blockchain-based payment network" for remittances and other applications. The Diem Association, the stablecoin project from Meta Platforms, will "begin the process of winding down" both the group and its subsidiaries over the next few weeks. Silvergate Bank described Diem's work as running "in a pre-launch phase."

Crypto-focused Silvergate Bank said it would not be able to file its annual report with the Securities and Exchange Commission (SEC) by the March 16 deadline because of a further weakening in its capital position since February 2023, when it reported dismal fourth-quarter earnings, and Bloomberg reported that the U.S. Department of Justice (DOJ) was investigating Silvergate's relationship with the failed FTX exchange and its hedge-fund affiliate Alameda Research. Silvergate said it was "evaluating the impact that these subsequent events have on its ability to continue as a going concern for the 12 months following the issuance of its financial statements".

US-based crypto-focused Silvergate Bank, has cut 40% of its total staff or about 200 employees and written off the $196 million related to its acquisition of the technology and assets of Diem Association from Meta, parking its plans to launch a blockchain-based payment platform. The bank was hit with outflows of around $8.1 billion in digital asset deposits during the fourth quarter's FTX debacle, which required the sale of $5.2 billion of debt securities at a loss of $718 million. However, Silvergate's Exchange Network Platform continued to operate with an average daily trade volume of $1.3 billion in the fourth quarter of 2022, rising from $1.2 billion in the previous quarter.

Crypto exchange Bybit is suspending USD bank transfers on March 10 due to service outages at its end-point processing partner." It didn't identify the partner, but it is speculated that it was Silvergate Bank. Silvergate discontinued the payments network that has served as a USD fiat transfer hub for the crypto industry, after the firm raised questions about its own viability. After March 10 customers can continue to buy crypto with credit cards

Crypto collapse: DCG's problem is Grayscale, FTX Bahamas agreement, DeFi trading arrest, Silvergate Bank, Huobi, Binance

"The Diem Association, the Meta Platforms-led enterprise that was looking to issue a new, user friendly stablecoin, is selling its technology to Silvergate Capital for $200 million, The Wall Street Journal reported, citing an unnamed source."

"Crypto-friendly bank Silvergate has filed a notification with the Securities and Exchange Commission (SEC) stating that it will delay the filing of its annual 10-K report, a move that has led its stock shares to spiral down by more than 30% in the after-hours trading on Thursday."

For crypto businesses, the options for U.S. banking are getting narrower as the Federal Reserve and other banking agencies warn that they don't want the lenders they oversee getting overly exposed to the digital assets sector. Only a few banks had been as openly and unapologetically crypto-focused as Silvergate, so its struggles aren't offering a shining path for other institutions to follow.

Last week California-based Silvergate Bank's parent went public on the New York Stock Exchange. It was a small IPO, raising about $40M and it's a small bank (about $250M market capitalization and $2.2M of assets).

US prosecutors in the Justice Department's fraud unit are reportedly looking into Silvergate's dealings with fallen crypto giants FTX and Alameda Research. The criminal investigation is examining Silvergate's hosting of accounts tied to Sam Bankman-Fried's businesses. The review adds to mounting scrutiny of the La Jolla, California-based crypto-friendly bank, which has also drawn the attention of lawmakers.

This a good explainer from Bloomberg's Matt Levine on Silvergate's business model and the events that led to its current debacle.