The cryptocurrency crash has claimed a new scalp. San Diego-based bank Silvergate is winding down operations following a run on deposits. This year’s mini-rally in digital token prices was not enough to soothe clients and regulators spooked by the collapse of FTX, one of Silvergate’s biggest clients.
Silvergate’s failure brings the disintegration of digital tokens into the regulated US financial system. It also breaks a golden streak for US banks. In 2022 and 2021 no Federal Deposit Insurance Corporation backed bank failed — an unusually long period.
The last failure was Kansas-based Almena State Bank in late 2020. Its deposits were less than $69mn. As of December 31, Silvergate’s were more than $6bn. It is likely to rank among the top 50 largest US bank failures recorded by the FDIC.