Silvergate Bank facts for kids
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| Public | |
| Traded as |
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| Industry | Financial services, cryptocurrency |
| Fate | Voluntary liquidation |
| Founded | 1988 (re-capitalized and reorganized into a bank in 1996) |
| Founders | Dennis Frank and Derek J. Eisle (1996 re-capitalization) |
| Headquarters | 4250 Executive Sq Ste 300, , |
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Area served
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Worldwide |
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Key people
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Alan Lane (CEO) Ben Reynolds (President) |
| Products | |
Silvergate Bank is a California bank founded in 1988. The company began providing services for cryptocurrency users in 2016, and conducted an IPO in 2019. In November 2022, concerns were raised about Silvergate's health, following the fall in cryptocurrency prices and the bankruptcy of FTX. In March 2023, the bank announced plans to wind down and liquidate.
History
Silvergate Bank was co-founded as a savings and loan association in 1988. In 1996 Silvergate was re-capitalized and reorganized into a bank by Dennis Frank and Derek J. Eisele, but it initially remained a three-branch community bank in the San Diego region. In 2022 it was led by CEO Alan Lane and president Ben Reynolds, although Mr Eisele remained on the leadership team as the chief credit officer.
In 2013, CEO Alan Lane personally invested in Bitcoin, and Silvergate launched an initiative to start serving cryptocurrency clients. After this, the bank grew rapidly, reaching $1.9 billion in assets and 250 clients by 2017. The company became public in November 2019 at a share price of $13, and by November 2021 the price had risen by 1,580% to $219 due to the cryptocurrency bubble at the time.
The bank operated a real-time payments system called the "Silvergate Exchange Network" (SEN), which enabled cryptocurrency exchanges, institutions, and customers to exchange fiat currencies such as US dollars and Euros. Silvergate was probably the first regulated bank to develop this sort of payment system. By the third quarter of 2022 it had $12 billion in deposits from 1,677 "Silvergate Exchange Network" (SEN) customers including all major cryptocurrency exchanges and over 1,000 institutional investors.
In 2021, Silvergate initiated efforts to launch its own US dollar stablecoin, acquiring Meta's Diem technology in January, 2022 for around $200 million to assist with this (Silvergate had previously intended to serve as a key issuer of the Diem currency for Meta). As of late 2022, the stablecoin had not yet launched.
In late 2022 — following a fall in cryptocurrency prices and the collapse of many cryptocurrency exchanges and schemes such as FTX — concerns were raised about potential impacts on Silvergate due to loss of deposits and credit exposure from SEN leverage, as well as potential impacts of Silvergate's issues on the wider cryptocurrency ecosystem due to Silvergate's key role in it. Some short sellers raised the prospect of a bank run. The share price of Silvergate had fallen 89% from its November 2021 all-time-high to $25, and its deposits fell to $9.8 billion. Silvergate has reported that it has adequate liquidity, that it only held FTX deposits, and that it was not exposed to FTX via lending. Senators Elizabeth Warren, Roger Marshall, and John Kennedy requested that the bank explain its relationship to FTX in December 2022. By December 2022 deposits at Silvergate had fallen to $3.8 billion.
Liquidation
On March 8, 2023, it was announced that Silvergate Bank would wind down its operations and liquidate.
See also
In Spanish: Silvergate Bank para niños
- Bankruptcy of FTX
- 2023 United States bank failures
