Ten days will be given to Silvergate Capital Corporation and its cryptocurrency-friendly bank to present a self-liquidation plan that complies with federal and Californian regulations.
The California-based Silvergate Bank, which specializes in offering banking services to cryptocurrency businesses, has been given the go-ahead to self-liquidate by the Federal Reserve Board (Fed). The directive follows Silvergate’s announcement in March that it would be ceasing operations as a result of market and legislative changes.
According to the Fed’s directive, Silvergate has ten days to produce a plan outlining how it would close down its business. A timetable for paying back all of the plan’s investors and creditors must be included. A receiver has also been chosen by the Fed to oversee the liquidation procedure.
As governments across the world scrutinize the cryptocurrency industry more closely, Silvergate decided to shut operations. A surge of withdrawals from other cryptocurrency exchanges followed the bankruptcy filing of the cryptocurrency exchange FTX in November 2022. Due to this, Silvergate, which had been a significant lender to cryptocurrency businesses, experienced financial and liquidity issues.
The liquidation of Silvergate is a major step for the cryptocurrency sector. One of the few institutions prepared to offer financial services to bitcoin businesses was the bank. These businesses will find it more challenging to access standard banking services as a result of its shutdown.
The Fed’s directive to Silvergate is another indication that authorities are approaching cryptocurrencies with increased caution. The Fed has resisted approving cryptocurrency banks, and judging by its directive to Silvergate, it is still not sure that the sector is prepared for widespread use.
Despite being a setback for the cryptocurrency business, Silvergate’s collapse, it is not a catastrophic blow. The sector is still in its early stages of development, and future years are anticipated to bring more difficulties. The sector has, however, previously demonstrated resiliency, so it’s feasible that it will get beyond these obstacles and carry on expanding.