US Bank Silvergate Covers $8bn In Crypto Withdrawals

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US bank Silvergate hit by more than $8 billion in customer crypto withdrawals in late 2022 amidst ‘rapid changes’ in industry

US bank Silvergate has revealed that its customers withdrew more than $8 billion (£6.8bn) in cryptocurrency-linked deposits in the last three months of 2022.

The bank said it had sold $5.2bn in assets to cover its costs and remain liquid. The withdrawals accounted for about two-thirds of its crypto deposits.

California-based Silvergate was formerly a small community bank, but during the latest crypto boom refocused on offering services to organisations in the crypto industry.

The bank went public in 2019 and saw its shares rocket more than 1,500 percent in 2021.

IoT Data analytics‘Rapid changes’

But the bank has seen its shares drop by 90 percent over the past year as the crypto values dropped and investor confidence sank.

The NYSE-listed firm’s shares fell more than 40 percent after it disclosed its extraordinary asset sale.

Silvergate chief executive Alan Lane said the bank had moved to maintain cash liquidity in response to the “rapid changes” in the crypto industry in the fourth quarter.

Silvergate bank blamed the withdrawals on a “crisis of confidence across the ecosystem”. It booked a $718m loss on its sales.

Crypto warning

One of Silvergate’s biggest customers was Alameda Research, the hedge fund set up by Sam Bankman-Fried, founder of the collapsed FTX crypto exchange.

Last week three US federal agencies, the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, warned banks that issuing or holding cryptocurrency was “highly likely to be inconsistent with safe and sound banking practices”.