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The rise and fall of Silvergate Bank: lessons for prudential regulation of crypto-sector banking

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  • Mark Warren

    (Central European University)

Abstract

Silvergate Bank began to “wind down operations and voluntarily liquidate” its bank in March 2023. Whereas Silicon Valley Bank and Signature Bank would be shut down by the Federal Deposit Insurance Corporation in the following days, this “crypto-sector bank” was able to satisfy depositor withdrawals and enter into voluntary liquidation. This paper examines how Silvergate Bank managed its balance sheet in a manner that maintained liquidity and its ability to satisfy substantial and unpredictable outflows from depositor withdrawals by its “crypto-firm” clients. Its approach was consistent with the ethos of the Basel III liquidity requirements to which many banks—though not Silvergate Bank—are subject. Yet the Silvergate model went further by recognising the idiosyncratic depositor dynamics of “crypto-firms”. This paper argues that prudential regulation should apply this model to (i) any bank that sources a substantial proportion of its funding from “crypto-firm” clients, irrespective of that bank’s size, and (ii) all deposits related to crypto-asset market participants at all banks.

Suggested Citation

  • Mark Warren, 2025. "The rise and fall of Silvergate Bank: lessons for prudential regulation of crypto-sector banking," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(1), pages 62-84, March.
    • Handle: RePEc:pal:jbkreg:v:26:y:2025:i:1:d:10.1057_s41261-024-00243-0
    DOI: 10.1057/s41261-024-00243-0
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    More about this item

    Keywords

    Banking; Liquidity; Bank run; Crypto-assets; Basel III;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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