There has been speculation in the community about the introduction FDIC receivership in relation to Silvergate Bank. A potential buyer for the industry-friendly digital asset bank could be Wells Fargo.
UPDATE: Rumors that Silvergate $SI will be seized (receivership) by the FDIC and Wells Fargo $WFC is set to take over customer accounts.
Source: “The amount of political pressure (WH/Elizabeth Warren) on regulatory agencies to cripple crypto is unprecedented right now.”
— Andrew (@AP_Abacus) March 2, 2023
One of the community members, citing a source, noted that the scale of pressure exerted by the member of the US Senate Banking Committee, Elizabeth Warren, on the industry is unprecedented.
On March 2, shares in the institution’s parent company, Silvergate Capital Corporation, plunged 57.7%. This is how the market reacted to the information about the delay in the publication of the annual report for SEC. The company said it took “additional time” to complete the audit.
The organization also cited “a number of circumstances” that affected the ability to submit documentation on time. In particular, the sale of investment securities “in excess of what was previously expected and disclosed in the company’s earnings report.”
Another factor was new bond issues in January and February 2023. Silvergate’s going to reflect [по ним] losses.”
Accounting for write-offs on securities could adversely affect the capital adequacy of both the bank and Silvergate Capital Corporation, the company warned.
Against the backdrop of speculation, many industry participants have come forward with claims of little or no impact on their business from the situation around the institution.
In particular, this was reported in Tether, Galaxy Digital And Paxos. The latter stopped all transfers SEN to Silvergate accounts. Similarly, prior to the relevant notification, Coinbase and CBOE.
Bakkt pointed to the suspension of a number of services related to the institution. The company is operating normally.
We are closely monitoring the situation with Silvergate and are in the process of discontinuing usage of certain services. All Bakkt services remain operational.
— Bakkt (@Bakkt) March 2, 2023
Circle spoke in a similar vein.
1/ We maintain relationships with several banking partners. We are sensitive to the concerns around Silvergate and are in the process of unwinding certain services with them and notifying customers. Otherwise, all Circle services, including USDC are operating as normal.
— Circle (@circle) March 2, 2023
“The company interacts with various partners for USDC reserve management and settlement, ensuring reliable liquidity management,” its representatives explained.
MicroStrategy announced the presence of a loan attracted from the bank with repayment in the first quarter of 2025. The obligations of the company will not change in case of initiation of bankruptcy proceedings. The software maker clarified that it does not hold bitcoins on the accounts of the organization and has no other financial relations with it.
We have a loan from Silvergate not due until Q1 ’25. There are mkt concerns re SI’s fin. condition. For anyone wondering, the loan wouldn’t accelerate b/c of SI insolvency or bankruptcy. Our BTC collateral isn’t custodied w/ SI & we have no other financial relationship w/ SI.
— MicroStrategy (@MicroStrategy) March 2, 2023
Certain concerns arose in relation to Gemini. As of the end of January, the exchange held a portion of $267 million in GUSD reserves in Silvergate accounts.
Representatives of the platform assured that by now they have withdrawn both client funds and stablecoin collateral from the bank. Gemini has stopped processing payments through Silvergate.
1/ We are actively monitoring the situation with Silvergate Bank. We currently have zero customer funds and zero GUSD funds held at Silvergate.
— Gemini (@Gemini) March 2, 2023
“We hold all US dollars on behalf of clients in FDIC insured banks or money market funds with a focus on securities issued or guaranteed by US authorities,” the company said.
Earlier, Binance transferred more than $400 million from accounts opened by its US division with financial institution Merit Peak, a trading firm founded by bitcoin exchange CEO Changpeng Zhao.
The leadership of the crypto derivatives platform LedgerX also urged to refrain from the services of Silvergate to its customers.
The digital asset-focused institution posted a net loss of $1.05 billion in the fourth quarter of 2022. The collapse of FTX, which was a bank client, caused a deterioration in the operating environment.
The company also struggled with access to finance as it sought to reduce its reliance on Federal Home Loan Banks.
In the last reporting period, the bank recorded an outflow of deposits and took a number of measures to maintain liquidity. The company initially resorted to wholesale financing, and then to the sale of debt securities.
Moody’s has downgraded Silvergate Bank’s rating to B2 from Ba3, citing a deterioration in the underlying creditworthiness of the financial institution.
In November 2022, the company reported that less than 10% of its deposits were placed on the trading platform. The bank also disclosed the volume of client deposits in the accounts of the BlockFi platform going through the bankruptcy procedure – they did not exceed $20 million.
Earlier, senators Elizabeth Warren, John F. Kennedy and Roger Marshall demanded that the head of Silvergate, Alan Lane, provide detailed information about bank relations and FTX.
In late 2022, a class-action lawsuit was filed against the institution for its alleged role in transferring FTX user deposits to Alameda Research accounts.
In January 2023, U.S. federal prosecutors seized more than $6 million from former CEO of bankrupt exchange Sam Bankman-Freed, which was held in three Silvergate accounts in the name of the Bahamian subsidiary of the exchange, FTX Digital Markets.
In February, Bloomberg reported that the US Justice Department’s Fraud Unit was investigating the organization’s deals with FTX and Alameda Research. The company is mentioned in the list of creditors of the bankrupt bitcoin exchange.
Recall that on March 3, the price of bitcoin tested below $ 22,000 against the backdrop of news around Silvergate.
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