Silvergate Bank is winding down operations in a blow to the cryptocurrency industry

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Silvergate Bank, an important player in the cryptocurrency world, has announced that it plans to wind down operations and liquidate, the holding company said Wednesday afternoon.

Holding Company

Silvergate Capital

(bar: SI), he said in a New release Wednesday afternoon that the liquidation plan includes full payment of all deposits and that most deposit-related services will remain available during the closing process.

Silvergate shares fell 31% in after-hours trading to $3.40.

“This is very bad for the industry,” he said

Mizuho

Analyst Dan Dolev, who was skeptical about the long-term prospects of the digital asset industry. “You don’t want to have a house in a neighborhood where all the windows are broken.”

Silvergate, based in La Jolla, Calif., said in a filing with the Securities and Exchange Commission last week that it would delay filing its annual report and assess its ability to “continue as a going concern.”

The bank was founded in the late 1980s, but began to grow rapidly in 2013, when it began focusing on attracting cryptocurrency companies as clients. This fulfilled a need because at the time, many in the crypto industry were finding it difficult to find traditional companies willing to provide services for them. as a market for

bitcoin

And other currencies, the bank has also grown, boosting its deposit base to $14.3 billion by the end of 2021.

That collapsed last year with a series of bankruptcies in the cryptocurrency industry that culminated with allegations of fraud against the FTX trading platform, with which Silvergate had a banking relationship. In the fourth quarter, Silvergate saw a flurry of deposits, dropping $8.1 billion to $3.8 billion.

Senate Banking Committee Chairman Sherrod Brown (Dr.

Although Silvergate never evolved into anything more than a specialized bank, its demise has devastating consequences for the cryptocurrency industry. Most of the major digital asset companies had accounts there at one time, and the bank created the Silvergate Exchange Network, which allowed its customers to send money to each other in near real time, 24 hours a day, without going through other intermediaries.

As companies such as Circle Internet Financial and Gemini Trust Co. And

Coinbase Global

(COIN) pulled out of doing business with the bank, and Silvergate shut down the network on Friday.

Silvergate’s hiatus comes as crypto firms find it increasingly difficult to find other traditional banking partners. This year, top US banking regulators sent banks a warning warning about the risks of doing business with crypto firms. Some in the industry report that they have difficulty finding any bank at all.

While the bitcoin price is up 32% to around $22,000 so far this year, some experts say the turmoil caused by the end of Silvergate, combined with reduced liquidity in the token market, could stop the rally in its tracks.

Write to Joe Light at [email protected]