The Federal Reserve Board has issued a consent order to Silvergate, a crypto-friendly bank, instructing it to wind down its operations. The company was supervised by the Federal Reserve Bank of San Francisco and California’s Department of Financial Protection and Innovation (DFPI). The order states that Silvergate must submit a shutdown plan to supervising agencies within ten days of the June 1 order, which must then be approved by supervisors before the company can adopt it.
Shutdown Plan
The order stipulates that Silvergate’s shutdown process must protect depositors and the Deposit Insurance Fund. This means that the company must maintain staff, manage financial instruments, and maintain records to the benefit of depositors. The order also specifies that Silvergate cannot make certain transactions or expand its business without regulatory approval. More specifically, it disallows “golden parachute” agreements that could excessively compensate new or reassigned executives.
Reasons for Shutdown
Silvergate initially announced voluntary self-liquidation on March 8, following a decline in deposits that started in late 2022 after the collapse of FTX. On March 1, Silvergate had announced that it would file a late 10-K form and said that it was considering its ability to “continue as a going concern.” This news, combined with earlier reports of inquiries, led to a bank run. Although the company is cooperating with regulators by providing documents and evidence related to its relationship with FTX and Alameda, one of its main services, the Silvergate Exchange Network (SEN), was discontinued in March.
Regulatory Compliance
Silvergate is required to comply with regulations to ensure that depositors and the Deposit Insurance Fund are protected during the shutdown process. The company must maintain staff, manage financial instruments, and maintain records to the benefit of depositors. Silvergate is also required to continue to cooperate with regulators following its shutdown.
Silvergate, a crypto-friendly bank, has been ordered to wind down operations by the Federal Reserve Board. The company must submit a shutdown plan to supervising agencies within ten days of the order, which must then be approved by supervisors before the company can adopt it. The order stipulates that Silvergate’s shutdown process must protect depositors and the Deposit Insurance Fund, and the company cannot make certain transactions or expand its business without regulatory approval. The reasons for the shutdown include a decline in deposits after the collapse of FTX and reports of inquiries, which led to a bank run. Silvergate is cooperating with regulators and is required to comply with regulations to ensure that depositors and the Deposit Insurance Fund are protected during the shutdown process.
Leave a Reply