Silvergate Bank facts for kids
 |
|
| Public | |
| Traded as |
|
| Industry | Financial services, cryptocurrency |
| Fate | Voluntary liquidation |
| Founded | 1988 (re-capitalized and reorganized into a bank in 1996) |
| Founders | Dennis Frank and Derek J. Eisle (1996 re-capitalization) |
| Headquarters | 4250 Executive Sq Ste 300, , |
|
Area served
|
Worldwide |
|
Key people
|
Alan Lane (CEO) Ben Reynolds (President) |
| Products | |
Silvergate Bank was a bank in California that started in 1988. It became well-known for working with people and companies involved in cryptocurrency, like Bitcoin. In 2019, it became a public company, meaning its shares could be bought and sold by anyone. However, in 2022, after cryptocurrency prices dropped and a big crypto company called FTX had problems, people worried about Silvergate. In March 2023, the bank decided to close down and sell off its assets.
Contents
The Story of Silvergate Bank
Silvergate Bank first opened in 1988 as a type of bank called a savings and loan association. This is a financial place that mostly helps people save money and get loans for homes.
In 1996, the bank was reorganized and got new money from Dennis Frank and Derek J. Eisele. It became a regular bank. For a while, it stayed a small, local bank with only three branches in the San Diego area.
Getting into Cryptocurrency
In 2013, the bank's CEO, Alan Lane, became interested in Bitcoin. This led Silvergate to start offering services to people and businesses that used cryptocurrency. After this, the bank grew very quickly.
By 2017, Silvergate had about $1.9 billion in assets and served 250 clients. In November 2019, the bank's shares were first sold to the public for $13 each. By November 2021, the price of these shares had jumped to $219. This big increase happened because of a time when cryptocurrency prices were rising very fast, often called a "cryptocurrency bubble."
The Silvergate Exchange Network (SEN)
Silvergate Bank created a special system called the "Silvergate Exchange Network," or SEN. This system allowed cryptocurrency companies, big investors, and customers to quickly exchange regular money, like US dollars and Euros, for cryptocurrencies. This was a very fast way to move money.
Silvergate was likely the first regulated bank to build such a payment system. By late 2022, the SEN had $12 billion in deposits. It was used by 1,677 customers, including all the major cryptocurrency exchanges and over 1,000 large investors.
In 2021, Silvergate also started working on its own digital currency, called a stablecoin. A stablecoin is a type of cryptocurrency designed to have a steady value, often by being linked to a regular currency like the US dollar. To help with this, Silvergate bought technology from another company in January 2022 for about $200 million. However, this stablecoin was not launched by late 2022.
Challenges and Concerns
In late 2022, the cryptocurrency world faced some big challenges. The prices of many cryptocurrencies fell, and some major crypto companies, like FTX, had serious problems. This made people worry about Silvergate Bank.
People were concerned that Silvergate might lose a lot of money that customers had deposited. They also worried about loans Silvergate had given out. Some people even thought there might be a "bank run," which is when many customers try to take all their money out of a bank at once.
The price of Silvergate's shares dropped a lot, from $219 to $25. The amount of money customers had deposited at the bank also fell from $12 billion to $9.8 billion. Silvergate said it had enough money to cover its needs and that it was not at risk from FTX's problems through lending.
However, some important politicians, including Senators Elizabeth Warren, Roger Marshall, and John Kennedy, asked Silvergate to explain its connection to FTX. By December 2022, the deposits at Silvergate had fallen even further, to $3.8 billion.
Closing Down
On March 8, 2023, Silvergate Bank announced that it would stop all its operations. The bank decided to close down and sell off its assets in an orderly way.
See also
- Bankruptcy of FTX
- 2023 United States bank failures
