The Rise and Fall of Silvergate’s Crypto Business

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ANALYSIS: Silvergate's crypto deposits peaked in 2021, well before the dramas of 2022 shook the sector. jesseahamilton digs into the bank's reported numbers

The sudden evaporation of most of its deposit base was only one of several worries for the La Jolla, California-based lender. The company has facedthat have been insisting that banks shouldn’t concentrate on crypto, and its disclosures this week revealed investigations from regulators and the U.S. Department of Justice, plus a suggestion that ongoing audits may require a restating of its financials.

And the bank's overall asset size also reached a high point in the fourth quarter of 2021, at $16 billion. Its most recent report showed it at $11.4 billion. According to U.S. bank capital rules, 5% is the edge of the cliff, beyond which a bank descends below a"well-capitalized" designation and toward the territory of emergency intervention from regulators.

Silvergate identified the number of digital-assets customers it was working with each quarter, and that crowd steadily rose to 1,620 last quarter – most of those identified as institutional investors, though more than 100 were"digital asset exchanges." However, those crypto customers' deposits plummeted from almost $12 billion in the third quarter last year to less than $4 billion by the end of the year.

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