Silvergate Bank Becoming Latest Victim of Crypto Business

What happened to Silvergate is actually nothing new. This incident was the result of a violation of the prudence principle and inadequate risk management.

Cryptocurrency has taken another hit with the collapse of Silvergate Bank, a financial institution that played a strategic role in the United States economy. Silvergate Capital Corporation (SCC), which is the holding company of Silvergate Bank, decided on 8 March to close down Silvergate Bank and liquidate it.

The SCC’s decision was initially triggered when, in the fourth quarter of 2022, Silvergate customers withdrew funds (bank run) amounting to more than US$8 billion. Silvergate was forced to sell its securities at a discount to cope with the massive fund withdrawal.

As a result, the California-based bank, which entered the cryptocurrency business in 2013, suffered huge losses amounting to $1.05 billion. In the third quarter of 2022, it still earned a profit of $40.6 million.