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The U.S. Federal Reserve Board issued a consent order with Silvergate Bank and its parent company as part of the institution’s plans to “wind down operations” and liquidate.
In a June 1 notice, the Fed said Silvergate Capital Corporation and the bank would have 10 days to submit a self-liquidation plan in accordance with California and federal requirements that would wind up its operations. The company announced in March that it plans to close operations “in light of recent industry and regulatory developments,” becoming one of three large crypto-friendly banks to close.
@federalreserve announces consent order against Silvergate Capital Corporation and Silvergate Bank to facilitate the voluntary self-liquidation that Silvergate announced on March 8, 2023: https://t.co/iWp4mfUeYI
— Federal Reserve (@federalreserve) June 1, 2023
While Silvergate voluntarily announced its liquidation with plans to “repay all deposits in full,” the Fed’s notice said inspections “revealed numerous shortcomings” at the bank following the November 2022 crash of cryptocurrency exchange FTX. a significant decline in customer deposits related to crypto assets” in the fourth quarter of 2022, resulting in “funding and liquidity exhaustion.”
In any Silvergate self-liquidation plan, the protection of depositors’ funds is a priority. Federal Reserve officials and the California Department of Financial Protection and Innovation will oversee and approve any plan proposed by Silvergate. In addition, regulators have limited Silvergate management’s ability to receive “golden parachute payments” and change responsibilities during the closing process.
RELATED: Crypto industry can avoid lasting damage from Silvergate liquidation
Silvergate was the first major crypto-friendly bank to go out of business, followed by Silicon Valley Bank and Signature Bank. Numerous digital asset firms, including Coinbase, Paxos, Gemini, Bitstamp and Galaxy Digital, previously had financial ties to Silvergate but have announced they are pulling out amid allegations of the bank’s involvement in the FTX collapse.