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Federal Reserve Gives Consent Order to Silvergate Capital Corporation for Voluntary Self-Liquidation

by Blockchain NewsJune 2, 2023

The Federal Reserve Board announced a consent order against Silvergate Capital Corporation and its subsidiary Silvergate Bank on Thursday, providing the necessary regulatory supervision for the financial institution’s voluntary self-liquidation. Silvergate initially announced this drastic action plan on March 8, 2023.

Silvergate Capital Corporation and Silvergate Bank, both headquartered in La Jolla, California, are now directed to follow their previously announced self-liquidation plan under the close supervision of the Federal Reserve. The principal intent of the Board’s order is to ensure the preservation of the Deposit Insurance Fund and to protect the rights of the bank’s depositors during the self-liquidation process.

Under the consent order, Silvergate is expressly prohibited from carrying out certain financial activities without prior regulatory approval. These activities include making capital distributions and the dissipation of cash assets, ensuring a smooth and secure wind-down process for all involved parties.

The Federal Reserve is not acting alone in this move. It’s taking these actions in coordination with the Department of Financial Protection and Innovation of the State of California. As the state chartering authority and state supervisor of Silvergate, the Department has a keen interest in overseeing the self-liquidation process in a manner that safeguards the interests of Silvergate’s depositors and the broader financial system.

The decision is a significant development in the unfolding saga of Silvergate Bank, underscoring the Federal Reserve’s commitment to ensuring the stability and security of the nation’s financial institutions. The joint actions taken by the Federal Reserve and the State of California highlight the rigorous regulatory framework in place to protect depositors and maintain confidence in the banking sector.

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Binance Accused of Commingling Customer Funds and Revenue, Says Reuters Report

by Blockchain NewsMay 24, 2023

Binance, the world’s largest cryptocurrency exchange, is facing allegations of having commingled customer funds with company revenue in 2020 and 2021, violating U.S. financial rules that mandate the segregation of customer money, according to a special report by Reuters. Citing three sources familiar with the matter, the report claims that the exchange held mixed accounts at U.S. lender Silvergate Bank, with sums running into billions of dollars.

According to Reuters’ report, the money flows highlighted a lack of internal controls at Binance, obscuring the location of client assets and risking their security. Despite the serious nature of the allegations, no evidence has been found to indicate that Binance client funds were lost or misused.

The special report by Reuters comes amid increased scrutiny from SEC chair Gary Gensler over the practices of crypto exchanges, with a particular focus on safeguarding client money. While Binance has not been directly targeted by the SEC, it faces allegations from the U.S. Commodity Futures Trading Commission (CFTC) of allowing U.S. customers to trade on its platform despite claims to restrict access.

Binance has refuted the allegations, according to Reuters. Binance spokesperson Brad Jaffe denied the commingling of funds, stating that the accounts in question facilitated user purchases of Binance’s own dollar-linked crypto-token, BUSD, likening the process to buying a product from Amazon.

The report from Reuters has drawn attention to the exchange’s financial operations as it faces civil charges from the CFTC and an ongoing investigation by the Justice Department for alleged money laundering and sanctions violations. The exchange’s banking future is unclear as the crypto sector faces a broader crackdown in the U.S.

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Tagged : Binance / BRAD JAFFE / Gary Gensler / News / Silvergate Bank

US Bank Failures Shock Regulators

by Blockchain NewsApril 29, 2023

Regulators in the United States have been prompted to re-evaluate their supervision after the high-profile failures of Signature Bank, Silicon Valley Bank (SVB), and Silvergate Bank. The New York Department of Financial Services (NYDFS) and the US Federal Reserve Board have both published their internal reviews on the handling of the failures, which occurred in March.

SVB was closed by California regulators on March 10, and Signature Bank was moved against by the NYDFS on March 12. Silvergate Bank had announced its voluntary liquidation on March 8, setting off runs on the banks. The string of bank failures sent shockwaves through the financial industry, with U.S. President Joe Biden even feeling the need to tweet a response.

The Fed review of SVB’s failure found that the bank’s management failed to manage its risks, and supervisors “did not fully appreciate the extent of the vulnerabilities” of the bank as it “grew in size and complexity.” The report noted that “SVB’s foundational problems were widespread and well-known.”

The NYDFS review of Signature Bank’s failure highlighted areas where the regulator’s supervision could have been more effective. The report noted that the bank’s risk management and compliance programs were not adequate, and that the bank had a “lack of clarity” on its risk appetite.

The failures of these banks have prompted US regulators to re-evaluate their supervision of financial institutions. The NYDFS and the Fed have both acknowledged the need for improvements in their supervision and have pledged to take action to strengthen their oversight.

The failures have also raised concerns about the risks associated with banks that are friendly towards cryptocurrency. Both SVB and Silvergate Bank were known for their crypto-friendly policies, and some have speculated that their failures may be linked to their exposure to the volatile cryptocurrency market.

Overall, the failures of Signature Bank, SVB, and Silvergate Bank have highlighted the need for stronger regulatory oversight of financial institutions. While the NYDFS and the Fed have acknowledged the need for improvements in their supervision, it remains to be seen whether these improvements will be enough to prevent future bank failures.

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Tagged : BANK FAILURES / News / Signature Bank / SILICON VALLEY BANK / Silvergate Bank / US REGULATORS

Blockchain Association Seeks Information on De-banking of Crypto Companies

by Blockchain NewsApril 17, 2023

The Blockchain Association, a cryptocurrency advocacy group, has filed additional Freedom of Information Law (FOIL) requests to regulators in the US. The group had initially filed for information from the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency. The new requests were submitted to the Federal Housing Finance Agency and the New York Department of Financial Services, seeking further information on the de-banking of crypto-friendly banks.

The organization is interested in learning more about the de-banking of cryptocurrency companies after the closure of Signature Bank and the failure of Silvergate Bank. These two banks were known for their friendly stance towards cryptocurrency-related businesses, but both were closed down, leaving many companies in the crypto industry without a banking partner.

The Blockchain Association believes that these closures were a result of regulatory pressure, and that the lack of transparency around the issue is problematic for the industry. By filing these FOIL requests, the group hopes to shed more light on the situation and ensure that the regulatory process is fair and transparent.

The de-banking of crypto companies has been a contentious issue for some time. Many banks are hesitant to work with companies in the industry due to concerns around money laundering and other illegal activities. However, for companies in the crypto space, having a banking partner is essential for conducting day-to-day business operations.

The closure of Signature Bank and Silvergate Bank has highlighted the fragility of the relationship between banks and cryptocurrency companies. The Blockchain Association is seeking to understand what led to the closures and whether there was any unfair regulatory pressure involved.

This is not the first time that the Blockchain Association has filed FOIL requests to obtain information about the regulation of cryptocurrency-related businesses. The group has been a vocal advocate for the industry and has worked to ensure that regulators take a fair and balanced approach to the sector.

As the crypto industry continues to grow, it is likely that we will see more regulation and scrutiny from regulators. The actions of the Blockchain Association demonstrate the importance of transparency and accountability in this process, and highlight the challenges faced by companies operating in this space. By working together with regulators, the industry can ensure that it continues to thrive and innovate, while also addressing legitimate concerns around security and illegal activity.

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Tagged : Blockchain Association / CRYPTO-FRIENDLY BANKS / De-Banking / FREEDOM OF INFORMATION ACT / News / Signature Bank / Silvergate Bank

Australian Bankers Association cost of living probe shows bank pressure

by Blockchain NewsMarch 20, 2023

The Australian Banking Association (ABA), which is the trade association for the Australian banking industry, has initiated a cost of living inquiry in order to investigate the impact that the COVID-19 pandemic, global supply chain constraints, geopolitical tensions, and other factors have had on the people of Australia. The purpose of this investigation is to determine how these and other factors have affected the cost of living in Australia. The primary purpose of this inquiry is to determine the degree to which these and other factors, in addition to Australia’s already high cost of living, have contributed to that level of expense.

The recent analysis of the rising inflation and concurrent collapse of three major traditional banks — Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank — proved that more than 186 banks in the United States are at risk of a similar shutdown if depositors decide to withdraw all of their funds. These banks were Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank. Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank were the names of these financial institutions. These particular banking establishments went under the names Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank respectively. These specific financial institutions were known by the names Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank, respectively, at one point in time. At one point in time, these particular financial institutions were known by the names Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank, respectively. The Australian Bar Association (ABA) is currently in the process of conducting an investigation with the intention of determining both the response of the fiscal policies of the Australian government as well as the means by which the cost of living in Australia may be lowered. The goal of the investigation is to determine both the response of the fiscal policies of the Australian government as well as the means by which the cost of living in Australia may be lowered. Both the reaction of the Australian government’s fiscal policies and the ways by which the cost of living in Australia may be lowered are the foci of the inquiry, the objective of which is to discover which of these may be determined. The aim of the study is to determine both of these things at the same time as part of its objective.

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Tagged : ABA / AUSTRIALIAN / News / Signature Bank / Silvergate Bank

Binance converts remaining $1 billion in Industry Recovery Initiative to native crypto amidst concerns around stablecoins

by Blockchain NewsMarch 13, 2023

On March 13, CZ tweeted that due to the changes in stablecoins and banks, Binance will be converting the remaining $1 billion funds in its Industry Recovery Initiative to native crypto. The native cryptocurrencies listed by CZ included Bitcoin (BTC), BNB (BNB), and Ether (ETH). He also posted links to the hash ID for the BTC and ETH transactions, revealing that $980 million took 15 seconds to move with a $1.98 transaction fee.

However, the decision by the Binance co-founder to sell the Binance USD (BUSD) stablecoin and convert the fund to more “volatile” assets received mixed reactions on Crypto Twitter. Some praised the decision, while others questioned the move to sell stablecoins and convert the fund to more volatile assets.

The depegging of the USDC stablecoin was caused by the failure of three major crypto-friendly banks – Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank. Circle, the company behind USDC, disclosed on March 10 that it had around $3.3 billion tied up at SVB. This caused the USDC stablecoin to fall to as low as $0.87 from its $1 peg. However, by March 13, USDC had bounced back towards its $1 peg and is currently hovering around $0.99. Circle also has an undisclosed amount of reserve funds stuck in Silvergate, another US-based crypto-friendly bank that went bankrupt.

The instability surrounding USDC caused a domino effect on other stablecoins such as Dai (DAI), USDD, and FRAX, which also slipped from their $1 peg. Since the events began unfolding on March 10, the crypto space has been on edge as to what will happen next. Twitter users have claimed that there is “nobody left to bank crypto companies.”

This recent event highlights the concerns surrounding stablecoins and the reliance of the crypto industry on traditional banking systems. As a result, some experts are suggesting the need for a decentralized banking system that is not reliant on centralized entities such as banks. In the meantime, it remains to be seen how stablecoins and the crypto industry will adapt to these challenges and uncertainties.

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Tagged : Binance / News / Signature Bank / Silvergate Bank / Stablecoins / SVB / USDC

Silvergate Bank Voluntary Liquidation Sparks Controversy in Crypto Industry

by Blockchain NewsMarch 9, 2023

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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Tagged : CRYPTO INDUSTRY / GOVERNMENT CRACKDOWN / Lawmakers / News / Silvergate Bank / VOLUNTARY LIQUIDATION

Silvergate Bank Unaffected by Crypto Market Fall: Growth QTD Report

by Blockchain NewsAugust 9, 2022

Silvergate Bank, a division of Silvergate Capital Corp, which provides financial services to entities in the digital currency ecosystem, has come off as one of the most impressive crypto-linked stocks in the Quarter-to-Date (QTD) period.

Silvergate Bank, per its latest Q2 earnings report, recorded a very robust loan and deposit growth. It is quite unusual considering the second quarter was recorded when the most distressing mishaps in the digital currency ecosystem, including the collapse of Terraform Labs and Celsius Network.

As a key financier in the crypto ecosystem, the firm will likely be exposed to some of the mishaps that befell companies in the industry. However, that has proven not to be the case.

The performance report has proven that that is not the case. Silvergate Bank’s major performance metrics, including capital and profitability ratios, credit quality, net interest margin, and efficiency ratio, improved as well. This performance record also swerves further away from the combined observation in the crypto industry within the same time frame.

In the QTD period, Silvergate’s stock has seen a 91% growth, making analysts shine their radar on the company, which has largely outperformed tech stocks and other stocks like Coinbase Global Inc and Robinhood’s, both of which have had their fair share of woes in the past couple of months.

Silvergate Bank Growth Boosters

Silvergate Bank has been very strategic in its business model from inception, and it acquired the Intellectual Property of the Diem stablecoin project from Meta Platforms earlier in the year. The plan is to utilize the Diem payment infrastructure to bolster its offerings as a bank, and a stablecoin issuance may also be in the works for the firm.

Institutional investors have also taken a special liking to Silvergate Bank stocks, a trend that became more evident in the second quarter. While there are some corporate firms stacking up on Bitcoin, the filing procedures, tax obligations, and general regulatory ambiguity have made many more embrace more stable and trusted stocks as their own ways to gain exposure to the digital currency ecosystem.

Silvergate Bank has been on the receiving end in a positive way, and eyes are on the company on whether it will sustain its stock’s bullish performance for the rest of the year. With the positive rating it is receiving from analysts, chances are that the bullish sentiment around the stock will hang on for much longer.

Image source: Shutterstock

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Tagged : Coinbase / Market Update / Silvergate Bank / STOCK PERFORMANCE

Marathon Digital Refinances $100m Credit Facility from Silvergate Bank

by Blockchain NewsAugust 2, 2022

Marathon Digital Holdings, Inc., a major US enterprise Bitcoin mining firm, announced on Monday that it has secured another $100 million line of credit from Silvergate Bank backed by Bitcoin (BTC).

In July last year, the Bitcoin miner financed a $100 million revolving credit line with the crypto bank.

Hugh Gallagher, Marathon’s CFO, talked about the latest development: “We are pleased to be closing on these debt facilities and believe that the combination of a term loan and revolver provides Marathon with exceptional flexibility regarding our funding options. With these facilities in place, we have achieved our goals of adding capacity and optionality to finance our future operations growth. We thank the team at Silvergate for their engagement as we collaborated to put these facilities in place.”

The term loan comes with a variable interest rate, which is currently priced at 7.25%.

The miner announced refinancing the $100 million revolving line of credit that was set to expire in October 2022. At this point, the firm has no amounts outstanding under the revolving credit facility. The company secured both loan facilities backed by Bitcoin. The loans are set to mature in July 2024.

Marathon said it acquired the loan to give it the flexibility to navigate the market volatility. Part of the company’s strategy is to “risk” the business by becoming more resilient to a potential fall in Bitcoin prices. The firm is working to be agile with the turbulence of Bitcoin prices by leveraging its scale to negotiate favourable contract terms.

Marathon is building one of the largest Bitcoin mining operations in North America. Its mining operations are based in South Dakota/Nebraska (hosted by Compute North), Montana (hosted by Beowulf), and Texas (hosted by Compute North).

Like Marathon, most Bitcoin mining firms use their Bitcoins as collateral for fiat loans, which they can use to pay electricity costs, purchase ASICs or other mining hardware, finance other operational costs, or fund other growth projects.

Instead of traditional loans, Bitcoin-backed borrowing allows such mining firms to keep their Bitcoin while sourcing additional funds to expand their operations with fiat currency.

Image source: Shutterstock

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Tagged : Bitcoin Mining / Credit Line / Finance / Marathon Digital / Silvergate Bank

MacroStrategy Secures Collateral Loan, Worth $205m from Silvergate Bank for Purchasing Bitcoin

by Blockchain NewsMarch 30, 2022

MacroStrategy, a subsidiary of MicroStrategy, a US business software firm, announced Tuesday that it secured a $205 million term loan from Silvergate Bank, a crypto-focused bank.

The loan was offered through the Silvergate Exchange Network (SEN) Leverage program, which issues U.S. dollar loans using Bitcoin as collateral.

The interest-only loan was secured by a certain portion of Bitcoin held in MacroStrategy’s collateral account, with a custodian mutually agreed upon by MacroStrategy and Silvergate.

Based on the agreement terms, MacroStrategy will use the loan proceeds to buy Bitcoin; pay fees, interest, and expenses related to the loan transaction, or to use it for general corporate purposes, the firm revealed.

Michael Saylor, Chairman and CEO of MicroStrategy, talked about the announcement and said: “The SEN Leverage loan gives us an opportunity to further our position as the leading public company investor in Bitcoin. Using the capital from the loan, we’ve effectively turned our bitcoin into productive collateral, which allows us to further execute against our business strategy.”

Bitcoin as Investment

Early this year, MicroStrategy stated that it will continue purchasing Bitcoin despite bearish market conditions. In January, Phong Le, the Chief Financial Officer at MicroStrategy, mentioned that the firm is unfazed by the Bitcoin plunge as the company’s approach is to buy and hold cryptocurrency. The company’s strategy with Bitcoin has been to purchase and hold. So, to the extent the firm has excess cash flows or finds other ways to raise money, it continues to put it into Bitcoin, Le stated.

In the past year, MicroStrategy has become well-known on Wall Street after the Virginia-based firm began to purchase and hold Bitcoin. Initially, the company used the cash on its balance sheet to acquire the crypto before turning to the debt market to make more purchases.

As of June 30, last year, MicroStrategy held a total of 105,085 Bitcoins at an aggregate cost of $2.7 billion. That Bitcoin amount was valued at around $4 billion, based trading price of around $39,000 during that time.

Image source: Shutterstock

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Tagged : Bitcoin / COLLATERAL LOAN / Finance / Microstrategy / Silvergate Bank