Silvergate Bank Agrees to Federal Reserve Deadline for Wind-Down Plan of Crypto-Friendly Institution

In a significant development for the crypto-friendly banking sector, Silvergate Bank has agreed to comply with a Federal Reserve order to submit a self-liquidation plan to California financial regulators within the next ten days.

This decision comes as part of the process to wind down the bank’s operations, with the primary aim of safeguarding the interests of depositors and ensuring the bank’s solvency. The Federal Reserve’s Board of Governors made the announcement on Wednesday, highlighting numerous deficiencies in the bank’s operations and compliance with banking laws and regulations.

Challenges Stemming from Crypto Dealings

The Federal Reserve’s order attributed Silvergate Bank’s failure to its association with the now-defunct crypto exchange, FTX. The collapse of FTX Trading Ltd., along with its affiliated proprietary trading firm Alameda Research LLC, dealt a severe blow to the bank’s business, resulting in a significant decline in deposits from its crypto-asset-related customers. Additionally, Silvergate Bank faced further challenges due to its business strategy tied to the digital asset industry and a bank run that foreshadowed similar runs at other prominent banks.

Emergency Loan and Controversial Measures

To weather the storm caused by the FTX collapse and the decline in deposits, Silvergate Bank resorted to an unconventional and controversial measure by securing a multi-billion dollar emergency loan from the Federal Home Loan Bank of San Francisco.

This government-created entity, primarily responsible for supporting mortgage borrowing in the United States, extended financial assistance to Silvergate Bank. This extraordinary step highlights the severity of the situation and the urgency with which the bank needed to address its funding and liquidity stress.

Approval and Scrutiny

The self-liquidation plan that Silvergate Bank is required to submit must be approved by the California Department of Financial Protection and Innovation. While a deadline extension for the plan can be granted, it is crucial for the bank to demonstrate its commitment to conserving cash and other resources to ensure depositors are made whole. The involvement of regulators in approving bonuses, promotions, and severance payments for senior executives underscores the stringent oversight and scrutiny imposed on the bank’s leadership.

Federal Reserve’s Authority

The Federal Reserve’s action against Silvergate Bank demonstrates its authority to intervene in the operations of state-chartered banks, such as Silvergate, which are part of the central bank’s system. Acting as the lender of last resort, the Federal Reserve has a responsibility to maintain the stability of the banking industry and protect depositors’ interests. By leveraging its authority, the Federal Reserve aims to mitigate the adverse effects of the bank’s failure and oversee a controlled wind-down process.


The Federal Reserve’s order for Silvergate Bank to file a self-liquidation plan is a significant development in the crypto-friendly banking sector. With numerous deficiencies identified by state regulators and officials from the Federal Reserve Bank of San Francisco, the bank’s dealings with FTX and its collapse have had far-reaching consequences.

The bank’s voluntary compliance with the enforcement action demonstrates its recognition of the need to address the challenges it faces and protect its depositors. As regulators oversee the liquidation process, ensuring depositors are made whole will be of paramount importance, and the Federal Reserve will play a crucial role in supporting this process.

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