Silvergate Bank Voluntary Liquidation Sparks Controversy in Crypto Industry
![Silvergate Bank Voluntary Liquidation Sparks Controversy in Crypto Industry Silvergate Bank Voluntary Liquidation Sparks Controversy in Crypto Industry](https://i0.wp.com/image.blockchain.news/features/E32267327CCEB5C9F49BDA2D94642D793930647D6346D7B0BF5E8E67A69423AD.jpg?resize=780%2C470&ssl=1)
The voluntary liquidation of Silvergate Bank, a crypto-friendly bank, has caused a stir in the crypto industry, with many sharing their thoughts about the bank’s troubles and the broader impact of its collapse on crypto. Some United States lawmakers have taken the opportunity to criticize the crypto industry, labeling it as a “risky, volatile sector” that “spreads risk across the financial system.” Senator Elizabeth Warren called for regulators to “step up against crypto risk,” while Senator Sherrod Brown expressed concern that banks that get involved with crypto are putting the financial system at risk.
However, these remarks have faced criticism from the community, with some arguing that it was not a crypto problem, but rather a fractional-reserve banking issue. Silvergate held far more in-demand deposits compared to cash on hand, which led to its collapse.
Several companies have used the recent announcement from Silvergate to reiterate their lack of or now-severed ties with the firm. Binance CEO Changpeng Zhao assured customers on Twitter that the crypto exchange does not have assets stored with Silvergate, while peer exchange Coinbase also assured its followers that no customer funds were held by the bank.
Nic Carter, co-founder of venture firm Castle Island and crypto intelligence firm Coin Metrics, suggested that the government was responsible for “hastening the collapse” of Silvergate by launching investigations and legal attacks on it. He referred to “Operation Choke Point 2.0,” which he claims is a sophisticated, widespread crackdown against the crypto industry. CEO of financial services firm Lumida, Ram Ahluwalia, had a similar take, arguing that Silvergate faced a bank run after a senator’s letter had undermined public trust in the firm. He claimed that “Silvergate was denied due process.”
Some believe that the collapse of Silvergate won’t necessarily hurt the crypto industry, but proposed changes to tax laws could exacerbate the exodus of crypto firms from the U.S. With Silvergate winding down, some have also asked where crypto firms will turn to now. Coinbase, which previously accepted payments via Silvergate, announced that it would facilitate institutional client cash transactions for its prime customers with its other banking partner, Signature Bank. However, Signature Bank announced in December that it intended to reduce its exposure to the crypto sector by reducing deposits from clients holding digital assets. To further reduce its crypto exposure, Signature Bank imposed a minimum transaction limit of $100,000 on transactions it would process through the SWIFT payment system on behalf of crypto exchange Binance.
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