Silvergate Capital Corporation has decided to opt for voluntary liquidation of its crypto banking enterprise called Silvergate bank. This decision has once again aired concerns among crypto stakeholders regarding the stability of crypto enterprises.
On the other hand, some crypto experts see it as a hindrance to the merger of traditional and DeFi enterprises in the future.
While Silvergate bank is shutting down its operations, another cryptocurrency exchange Kraken has recently announced the opening of a new bank. Silver gate officials testified in front of the SEC officials recently to explain the cause of the liquidation.
The crypto banking enterprise maintained that taking the route of the voluntary shutdown is the best way forward.
The first concern about any cryptocurrency organization is the direct impact on its active users. However, Silvergate bank has told SEC that the bankruptcy plan includes returning all the deposits of its users before liquidation.
Meanwhile, the crypto enterprise has also decided to settle all the outstanding financial claims and retain the remaining value of its assets as much as possible.
The main focus of the bank officials is to safeguard its proprietary technology and taxed assets. The bank is undergoing liquidation proceedings under the supervision of the Department of Financial Protection and Innovation.
The Deputy Commissioner of DFPO, Clotheilde Hewlett, has told the media that the government agency is responsible for overseeing compliance with financial and legal requirements and operates in tandem with a variety of federal regulatory agencies.
Silvergate was also Affected by FTX Collapse
Silvergate banking enterprise has many reasons for its collapse. However, the start of the end for this entity started with the crash of FTX and Alameda Research. Since then, other crypto enterprises such as Coinbase, Circle, Gemini, and Paxos have cut ties with the firm on account of warnings issued by the SEC.
There are also implications that the bank was not compliant with the legit banking services towards its clients. Its institutional investors have backed down on account of the assumption that Silvergate is not sufficiently capitalized.
Moody’s has also ranked the rating of this enterprise twice. Bitwise CIO Matt Hougan opines that Silvergate choosing to liquidate at this point is better than 4-5 years before when the relations between regulators and the crypto sector were narrower than present.