Silvergate Solvency In Question As Crypto Banking Troubles Brew

Silvergate Solvency In Question As Crypto Banking Troubles Brew

Business
October 11, 2022 by Admin
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What are the potential solvency risks for Silvergate as a crypto banking institution? Silvergate Solvency in Question As Crypto Banking Troubles Brew As the cryptocurrency market continues to gain traction with investors worldwide, one of the biggest players in the game, Silvergate Bank, has been faced with a big set of questions: Is the banking
702 silvergate solvency in question as crypto banking troubles brew

What are the potential solvency risks for Silvergate as a crypto banking institution?

Silvergate Solvency in Question As Crypto Banking Troubles Brew

As the cryptocurrency market continues to gain traction with investors worldwide, one of the biggest players in the game, Silvergate Bank, has been faced with a big set of questions: Is the banking platform solvent?

Silvergate Bank, the first US-chartered commercial bank to offer cryptocurrency banking services across multiple venues and a major player in providing deposits and loans to companies transacting in cryptocurrencies, has been plagued by recent financial rumors. The platform, founded in 2013, saw a 123% year-over-year growth in deposits as of October 2019, raising eyebrows as to how sustainable this incoming flood of capital is.

The bank’s aggressive growth policies, mainly online faith-based deposits, have been its primary source of income. It has raised hundreds of millions of dollars from its customers in voluntary deposits, completely outside the banking system. This new trend, seen by some as an indication of Silvergate’s risky lending practices, could in turn spell personal financial disaster to customers.

Concerns of Silvergate’s solvency gained mainstream attention when Bloomberg reported on March 14, 2020 that Morgan Stanley had blocked the bank’s incoming deposits and wiped out its reserves. The rapid-fire developments within the banking sector, coupled with the global market volatility caused by the Covid-19 pandemic, have made customers increasingly wary regarding the platform’s insolvency.

Silvergate has sought to allay fears with a tweet on March 13th, announcing its solvency in light of the Bloomberg report. The bank’s statement reads, “Silvergate Bank is not insolvent. Our deposits remain well within the ranges used to maintain regulatory capital in the past. We have substantial liquidity.” They added that customer deposits had grown to a record-breaking $1.8 billion, with no intention of reversing this trend.

But industry watchers remain unconvinced. The platform’s continued reliance on non-traditional banking sources has caused some to ponder the long-term viability of such a business model. Others simply refuse to trust any crypto-banking institution while the industry remains so volatile and unpredictable.

Though Silvergate Bank may be solvent right now, it remains to be seen how long the platform and other crypto-banking institutions can stay afloat in this treacherous economic climate. Customers considering placing their faith in these digital assets may want to hold their horses and wait until the dust settles.