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FDIC officials are reportedly looking at the books and records of Silvergate Bank and could provide a remedy for bank to come out of the turmoil.
Crypto-focused bank Silvergate Capital is facing a major crisis at its end and is looking for a way to stay in business. As per the latest reports, Silvergate Bank has been reportedly talking with the officials at Federal Deposit Insurance Corp thereby discussing ways to avoid a shutdown.
Sources familiar with the matter said that one possible option under consideration is lining up with crypto industry investors to boost its liquidity. The sources said that FDIC examiners visited Silvergate’s La Jolla, California, offices last week.
The lender is working out ways in order to get itself out of this financial turmoil that it faces. One of the sources also told Bloomberg that the top banking institution Federal Reserve had authorized FDIC officials to visit Silvergate’s offices. Representatives from neither Silvergate bank nor the FDIC have responded to Bloomberg’s questions.
However, the involvement by the FDIC clearly highlights the urgency that Silvergate is facing to come out of the mess. Last week, reports of possible insolvency for Silvergate Bank emerged thereby dragging the entire crypto market to the south.
After the collapse of the crypto exchange FTX in November 2022, Silvergate Bank started facing major operational challenges at its end. The bank has witnessed heavy withdrawals from its crypto customers and was forced to sell its securities to meet this liquidity demand.
As per its latest filings, Silvergate Bank’s deposits by December 31 stood at $6.3 billion. This was more than 50% down from the $13.2 billion in deposits by the end of September. As a result, the FDIC officials are reviewing the bank’s books and records, said sources.
Silvergate Bank and Regulators
The US regulators have been closely watching the developments panning out at Silvergate Bank. Prosecutors at the fraud unit of the US Justice Department have been looking into Silvergate’s dealings with FTX and sister group Alameda Research. So far, the bank isn’t facing any charges of wrongdoing.
The US regulators have fastened efforts to bring a regulatory framework for banks dealing with crypto firms. Interestingly, the developments have also drawn comments from Fed Chairman Jerome Powell. Speaking to lawmakers on the Senate Banking Committee, Powell said:
“Like everyone else, we’re watching what’s been happening in the crypto space, and what we see is quite a lot of turmoil. What we’ve been doing is making sure that the regulated financial institutions that we supervise and regulate are careful, are taking great care in the ways that they engage with the whole crypto space and that they give us prior notice.”