Troubled Crypto Bank Silvergate Sees Regulators Swoop In To Try To Help It Stay Afloat

Troubled Crypto Bank Silvergate Sees Regulators Swoop In To Try To Help It Stay Afloat
Cryptocurrency (Photo by Jakub Porzycki/NurPhoto via Getty Images) © Courtesy of Market Insider Crypto Coins (Photo by Jakub Porzycki/NurPhoto via Getty Images)
  • According to Bloomberg, Silvergate is in talks with FDIC regulators to find ways to avoid bankruptcy as its finances deteriorate.
  • Cryptocurrencies have expressed doubts about their existence and major SENs shut down their payment services last week.
  • Silvergate shares fell on growing concerns about key industry players.

Troubled crypto bank Silvergate Capital is in talks with US regulators to find a way out of the deal amid growing concerns from big players in the digital asset industry, Bloomberg reports.

Officials from the Federal Deposit Insurance Corporation met and visited the management team at the Silvergate, California, headquarters last week, Bloomberg reported Tuesday, citing people familiar with the matter.

Silvergate, which used to bet on the biggest names in cryptocurrency, said last week that it was evaluating its ability to continue as a going concern. This popular lender in the industry has been hit hard by the collapse of digital assets and the collapse of its client FTX over the past year.

One of the ways that Silvergate is helping to stay afloat at FDIC meetings, according to Bloomberg, is by bringing in cryptocurrency investors to help banks raise funds. Institutional deposits fell more than 50% to $6.3 billion in the three months ended December 31.

But the company has yet to decide how to deal with its deteriorating finances, and FDIC officials are reviewing its books, according to the report.

Since customer cryptocurrency deposits are insured by the US government, the FDIC could be key in finding a viable solution to the risk. The agency insures client deposits at banks and oversees accreditation - the process it uses to manage troubled companies - for these institutions.

Last week, Silvergate delayed filing its annual report with the Securities and Exchange Commission, saying it needed more time to see how much events in the crypto world had damaged its finances.

On Friday, the bank canceled its Silvergate exchange network, another sign that it is considering cutting back on business.

Payment services offer fast transfers between investors and cryptocurrency exchanges, unlike traditional bank transfers, which usually take a few days. This has made it a staple of the cryptocurrency industry.

"SEN is Silvergate's flagship product and was previously the main attraction for depositors bringing money into the bank," Wedbush analysts told Reuters.

Silvergate shares are down more than 60% since last Wednesday's close, a drop of nearly 96% in the past 12 months, as more than a dozen of the company's crypto clients were shut down, fined or investigated. They were slightly higher in premarket trading on Wednesday, up 0.7% at $5.25.

Silvergate did not immediately respond to internal requests for comment outside of normal business hours. The FDIC referred the bank's top regulator to Federal Reserve Insider, who did not immediately respond to a request for comment.

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