US bank Silvergate, which caters to crypto, reports liquidating debt to cover $8.1B withdrawals as FTX collapsed and laying off 40% of its staff; SI falls 40%+
Bank sold assets at a loss to cover withdrawals and cut 40% of its staff but remains committed to crypto
Wall Street JournalDavid Benoit
Context & Ripple Effects
Silvergate was already under congressional scrutiny as one of the few U.S. banks enabling customers to move dollars onto crypto exchanges after FTX’s collapse. Its loss-making asset sales turn that scrutiny into an immediate liquidity event rather than a reputational problem alone.
Silvergate covers $8.1 billion of withdrawals by selling assets at a loss, while its 40% staff reduction sharply contracts the bank’s operating capacity.
Silvergate shareholders absorb an immediate repricing as SI falls more than 40%, even as the bank says it will continue serving crypto clients.
Second-order effects
Crypto firms that relied on Silvergate for dollar transfers face a less secure banking counterparty as the bank’s liquidity is depleted and workforce reduced.
The withdrawal shock strengthens the case for other U.S. banks to reduce crypto exposure, a pullback later reflected in reports that banks were re-evaluating even small crypto relationships.
Third-order effects
The failure path from FTX-linked withdrawals to Silvergate’s liquidation suggests crypto firms’ access to regulated banking can be concentrated in a small number of intermediaries, making a single counterparty’s stress systemically consequential for the sector.
As investigations and losses converge, banks may treat crypto-client concentration as a risk requiring tighter limits, widening the sector’s gap with conventional financial infrastructure.
The trend: Crypto’s dependence on a limited set of banking intermediaries is colliding with heightened counterparty, liquidity, and regulatory risk after major platform failures.
Silvergate is in a tiny club of tiny banks providing deposit/fund transfer/security/etc. services to a crypto-ecosystem that operates in a mammoth regulatory vacuum and amid widespread grift/fraud. To me, it's The Continental and its collapse seems likely. https://www.wsj.com/...…
Customers yanked $8.1bln out of Silvergate, forcing it to sell bonds at losses that wipe out years of profit and to cut 40% of staff this week. It remains committed to crypto. https://www.wsj.com/...
“Silvergate will take an impairment charge of $196 million in the fourth quarter of 2022 related to developed technology assets purchased from the Diem Group” https://ir.silvergate.com/... https://twitter.com/... https://twitter.com/...
TBH as much as I think SI is screwed, the fact it managed withdrawals that exceeded its market cap at ATH is rather impressive. Unlike others, if SI goes down they actually do have a crypto network that's worth more than most “crypto payment” platforms https://www.wsj.com/...
Zuck's Diem dream just took another knock: Silvergate is taking a $196m hit after buying the crypto project from Meta, now saying that the platform's launch is no longer imminent https://ir.silvergate.com/... https://twitter.com/...
More details emerge of the stress FTX's collapse placed on Silvergate, though the bank remains committed to its crypto-focused strategy, WSJ's @DaveCBenoit reports: https://www.wsj.com/... https://twitter.com/...
Congratulations to @SenWarren for her misleading and short seller ghostwritten hit piece on Silvergate. Really helped fuel a bank run and enrich the shorts. I hope she made money! https://twitter.com/...
The collapse of FTX sparked a run on Silvergate, forcing the bank to sell assets at a steep loss to cover some $8.1 billion in withdrawals. The bank has laid off 40% of its staff, or about 200 employees. WSJ reported. https://www.wsj.com/...
“To satisfy the withdrawals, Silvergate liquidated debt it was holding on its balance sheet. The $718 million it lost selling the debt far exceeds the bank's total profits since at least 2013.” $SI https://www.wsj.com/...