Silvergate’s Voluntary Liquidation

Setting the record straight

No bank in U.S. history had survived a 70% deposit run until the fourth quarter of 2022, when Silvergate satisfied customer withdrawals totaling 70% of demand deposits over a few weeks. The bank’s ability to withstand a significant deposit run was not unplanned.

War on the Crypto Industry

Silvergate opened its first U.S. dollar deposit account for a bitcoin trading firm in early 2014. At the time, Silvergate was a small community bank with less than $500 million in deposits. By 2022, Silvergate’s deposits had grown to over $14 billion, substantially all of which were from business customers serving the crypto industry.

Silvergate’s flagship product was the Silvergate Exchange Network (SEN), which allowed crypto businesses to transfer their U.S. dollar deposits 24 hours a day, 7 days a week. The SEN was the first of its kind global, 24/7 U.S. dollar deposit network, and operated with full regulatory transparency from its launch in 2017.

As the crypto industry came under stress during 2022, several high-profile crypto funds and exchanges commenced formal insolvency proceedings. This created contagion in the industry that ultimately led Silvergate clients to significantly reduce their U.S. dollar deposits, resulting in the run on the bank referenced above. Silvergate management had prudently structured its balance sheet to withstand such a shock.

In a different political environment, bank regulators might have lauded the successful execution of Silvergate’s liquidity contingency plan. Instead, in the months that followed, Silvergate became a target of the Biden Administration’s War on the Crypto Industry. Various federal agencies launched “investigations” into Silvergate, while federal banking regulators issued public “Joint Statements” to the banking industry designed to severely restrict banks’ ability to provide banking services to the crypto industry (those Statements were withdrawn in 2025).

The intent was clear. Although Silvergate survived a 70% run on the bank and still maintained sufficient liquidity and capital to serve its clients, the Biden Administration was determined to prevent Silvergate from continuing its stated mission as the leading provider of innovative financial infrastructure solutions to the crypto industry.

Clarifying the public record

Under U.S. federal banking regulation, former bank insiders are prohibited from disclosing bank regulatory confidential supervisory information (“CSI”). However, anyone can use critical thinking and public-domain information to address uninformed criticisms of Silvergate’s business. These criticisms typically fall into three categories, and none survive logic and reason, for “anyone who has ears to hear, and eyes to see…”

1. Business Concentration: The concentration risk most often cited is Silvergate’s “industry/sector risk” to the crypto industry. Some have speculated that if Silvergate’s business had been more diversified, it might have survived, missing the point that Silvergate did, in fact, survive the ultimate stress test. Diversification is not a substitute for risk management. Silvergate’s focus on the crypto industry was a clearly articulated strategy that clients, investors, and regulators understood. Management purpose-built its balance sheet and risk management program with this concentration risk in mind, and the bank survived a deposit run larger than that of its more diversified competitors.

2. Interest Rate Risk: Silvergate’s primary business was to provide its crypto-industry clients access to their U.S. dollar deposits 24/7/365. To achieve this business objective in the face of large deposit fluctuations, management structured the asset side of its balance sheet with high-quality liquid assets that could (a) serve as collateral for borrowings; and (b) be readily sold if needed. When Silvergate borrowed against its liquid assets, it always did so on a fully collateralized basis at the then-current market values. This was also true in the fourth quarter of 2022, near the end of a rapid Fed Funds rate-hiking cycle in which the Federal Reserve increased rates 425bps in nine months (a pace not seen since the early 1980s). Silvergate did not use a special government program such as the Bank Term Funding Program (BTFP), which the Federal Reserve created in March 2023 after two regional banks collapsed from deposit runs smaller (as a percentage of their deposits) than the 70% run Silvergate had survived months earlier. Silvergate was forced to sell liquid assets at a loss to repay collateralized borrowings but had enough capital to absorb the loss and enough liquidity to continue operating. Silvergate remained both solvent and liquid.

3. Regulatory Compliance: Silvergate was subject to annual regulatory safety & soundness exams and periodic targeted reviews. At all times during its nine-year service to the crypto industry, Silvergate operated with complete transparency and open dialogue with its regulators…and no regulatory agency has proven that Silvergate’s Anti-Money Laundering controls failed (see also Kate Fraher on X).

Silvergate built a successful business over nine years serving a growing, volatile industry, and survived a stress test no other bank has ever survived. The subsequent coordinated attack by the Biden Administration ultimately led to Silvergate’s March 8, 2023, announcement that it would wind down operations. Some have speculated that the announcement of Silvergate’s voluntary liquidation triggered the banking crisis of 2023, with regional banks significantly larger (and more diversified) unable to withstand relatively smaller deposit runs.

Silvergate did not fail, and with its incredible team, could have continued serving its clients. In the face of political pressure from the Biden Administration, Silvergate chose to voluntarily wind down its operations.

A final message of gratitude

I want to thank the more than 1,500 businesses in the crypto industry that trusted Silvergate. It was a privilege to partner with you. The politically motivated abuse of power aimed at Silvergate and the broader crypto industry was unprecedented, unethical, and likely unlawful. It strongly validated the need for a censorship-resistant, decentralized, secure protocol for money.

To Silvergate investors, I know the finance adage that “being early is the same as being wrong.” It’s hard to argue that Silvergate was not early, but I do not believe you were wrong – I still personally own a substantial number of shares of Silvergate common stock.

Next, a word of thanks and admiration to the Board of Directors of Silvergate, not only for your support and leadership during our nine-year journey serving the crypto industry, but also for your perseverance to the end. “Blessed are those who are persecuted for righteousness’ sake, for theirs is the kingdom of heaven.” (Matt. 5:10)

And finally, to the amazing Silvergate team. Silvergate was special primarily because of its people. It was the absolute honor of my career to work shoulder-to-shoulder with you in the trenches. Don’t forget, as I said on many internal Silvergate AMAs: “buy bitcoin” (not investment advice) and learn why bitcoin might be the best form of money ever invented (discovered) by humanity. I miss you, and I pray that you and your families are well.

Praise God!

Alan J. Lane, Former Silvergate CEO