• Silvergate Bank received a $4.3 billion bailout from the Federal Home Loan Bank after the collapse of crypto exchange FTX.
• The bank’s deposits had spiked following withdrawals from customers after the FTX collapse and dropped by $3.8 billion by the end of 2022.
• Silvergate’s CEO reported that the firm had less than 10% exposure to FTX as of September 30, and deposits from BlockFi accounted for less than $20 million of the bank’s total deposits.
After the collapse of FTX, one of the major crypto exchanges, Silvergate Bank was at a critical position. As the bank’s business model focused on providing banking services to crypto exchanges and investors, around 90% of the bank’s deposits were from crypto. Silvergate’s 10 biggest depositors, including Coinbase, Paxos, Crypto.com, Gemini, Kraken, Bitstamp and Circle, represented about half of the bank’s deposits.
Due to the FTX collapse, Silvergate’s users had withdrawn $8.1 billion of digital assets by December 2022, causing the bank’s deposits to drop by $4.1 billion to $3.8 billion. This is when the bank received an $4.3 billion bailout from the Federal Home Loan Bank. However, the fears of Silvergate’s users were put to rest when Alan Lane, the bank’s CEO, reported that the firm had less than 10% exposure to FTX as of September 30 and BlockFi deposits accounted for less than $20 million of the bank’s total deposits.
Although the $4.3 billion bailout came as a relief to Silvergate Bank, the FTX collapse still had a huge impact on the bank. The bank’s deposits had dropped significantly and its customers had withdrawn a large amount of digital assets. It remains to be seen if the bank will be able to recover from this setback and return to its former glory.