The Biden Administration is “aware of the situation” at Silvergate and will continue to monitor reports on the troubled bank as it unfolds, according to a White House spokesperson.
Speaking at a press briefing on March 6, Press Secretary Karine Jean-Pierre said the White House hasnoted that Silvergate marked another major crypto firm to “experience significant issues” in recent months but declined to go into further specifics on the firm.
“In recent weeks, banking regulators have released guidelines on how banks should protect themselves from risks associated with crypto,” she said, adding that:
“This is a president that has repeatedly called on Congress to take action to protect everyday Americans from the risk posed by digital assets and he will continue to do so. We won’t speak to this particular company as we have not with other cryptocurrency companies, but we will continue to monitor the reports.”
Silvergate, known as a “crypto bank,” was a key banking partner to a number of major crypto companies and projects.
However, uncertainty over the bank’s solvency began to spread at the start of 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.
On the back of that news, Coinbase announced on March 2 that it had terminated its partnership with Silvergate, as the crypto exchange also alluded to concerns over the Department of Justice’s investigation into the firm over involvement in the collapse of FTX.
At Coinbase all client funds continue to be safe, accessible & available.
In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.
— Coinbase (@coinbase) March 2, 2023
Several crypto heavyweights promptly followed suit by either 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 was shutting down its digital asset payment network Silvergate Exchange Network due to “risk-based” concerns, sparking further uncertainty over the firm’s financials.
Related: Investor concerns persist as crypto investment products see 4th week of outflows
As a result, Silvergate’s stock price (SI) has plummeted roughly 60% since March 1, while the total combined market cap of crypto has dropped around 5.5% to $1.072 trillion in that same time frame.
Speaking with CNBC on March. 6, economist Noelle Acheson, the author of the Crypto is Macro Now newsletter, suggested that if Silverbank were to file for bankruptcy, it would give regulators a far greater excuse to clamp down on crypto than before, given the bank’s ties to traditional finance.
“Up until now we’ve been able to say that the fallout of everything that happened last year was contained within the crypto industry — painful, but contained,” Acheson said, adding that:
“If Silvergate goes under then the regulators will be able to say ‘aha, systemic risk, we told you so.’ That will give them even more ammunition to go after crypto and increase their choke on fiat access for crypto businesses.”