The FDIC, the government agency that insures bank deposits, was on Silvergate’s premises last week to figure out ways to salvage it. Bloomberg News reported Tuesday that officials were in talks with the lender to avoid a shutdown.
The move comes just days after the collapse of crypto exchange FTX and a $1 billion loss at Silicon Valley Bank, both of which had large shares of uninsured deposits. Those worries sent tremors through the banking industry.
Sources Say FDIC Examiners Visited Silvergate’s Offices Last Week
Last week, news of a possible Silvergate bank shutdown jolted the entire crypto market. Citing “people familiar with the matter,” Bloomberg reported on March 7 that regulators were in urgent talks with management on ways to salvage the lender.
The FDIC, the federal agency charged with overseeing financial institutions, is also involved in the discussions. Its examiners visited Silvergate’s offices last week and are currently reviewing the lender’s books.
One of the people told Bloomberg that the agency was authorized by the Federal Reserve to visit Silvergate’s headquarters. Another said that they were assessing how much money Silvergate owes to depositors, its cash on hand and the value of any assets it might liquidate.
While it’s unclear how much role the FDIC will play in this situation, it’s important to note that the agency has been involved in several bank failures over the years. These banks all had a slew of risky bets that correlated in non-obvious ways, which is what largely led to their downfalls.
One Possible Option Under Consideration Is Rounding Up Crypto-Industry Investors
Cryptocurrencies have been notorious for their volatility. For ordinary investors, this means they have to make decisions based on incomplete information.
As more people invest in crypto, the industry is increasingly under pressure to create a framework for investors to follow. That requires more data and tools to assess potential risks.
One option under consideration is rounding up the crypto-industry, an idea that could help investors diversify their portfolios. Currently, Robinhood and Cash App offer crypto-roundup features.
This type of roundup would allow people to select daily, weekly or monthly investments. It would also give them the ability to automatically withdraw their profits.
Crypto-focused venture capital funds have been popping up over the last few years. These firms aim to invest in companies that are transforming industries and technologies. They often focus on blockchain based companies that are building new data layers for the internet.
The Lender Hasn’t Decided How to Deal With Its Deepening Financial Turmoil
Silvergate, which is insured by the Federal Deposit Insurance Corporation, hasn’t decided how to deal with its deepening financial turmoil. FDIC examiners visited the lender’s offices last week and haven’t yet ruled out a shutdown, people familiar with the matter told Bloomberg News on Tuesday.
The bank lost $1 billion in the fourth quarter, and its deposits have fallen to $3.8 billion. Investors pulled $8 billion out of Silvergate after the collapse of crypto exchange FTX in November.
That drop forced the lender to sell investments, causing it to report a loss and slash dividends. In addition, the company shut down its flagship crypto-payment network last month.
Amid a regulatory crackdown, many of the companies it helped set up accounts with were eventually shuttered, fined or went into bankruptcy. These include Coinbase, Galaxy Digital, Paxos Trust Co. and Bittrex, according to court documents.
The Federal Reserve Has Authorized FDIC Examiners to Visit Silvergate
Silvergate Capital, a crypto-friendly lender that is in deep trouble, has been talking with officials from the Federal Deposit Insurance Corp. to discuss ways to avoid a shutdown, according to Bloomberg News.
According to the report, FDIC examiners visited Silvergate’s offices last week and are reviewing its books and records. Those efforts could provide a remedy for the bank to come out of its turmoil, sources say.
One option under consideration is to line up with investors in the crypto industry to boost its liquidity, a source said. That would help the lender reclaim some of the deposits it lost when the collapse of cryptocurrency exchange FTX pushed it into a liquidity crisis in November 2022.
The lender hasn’t decided how to deal with its deepening financial turmoil, said the people who asked not to be named discussing internal deliberations. The Fed, which is the lender’s main federal overseer, authorized FDIC examiners to visit Silvergate’s offices last week.