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The fallout of crypto-focused bank Silvergate has jolted the crypto sector in the past few days, drawing the attention of US regulators and now the White House. On Monday, White House Press Secretary Karine Jean-Pierre told reporters that Biden’s administration was “clearly aware of the situation”, adding that the White House was closely monitoring Silvergate.
“So, we are aware of the situation and monitoring the reports.” Said Karine when pressed to disclose the government’s position on the bank’s problems.
“I won’t comment on Silvergate specifically but it is obviously only the latest company in the cryptocurrency field to experience significant issues in recent weeks. Banking Regulators have released guidelines on how banks should protect themselves from risks associated with crypto,” she added.
She went on to note that the president that had repeatedly called on Congress to take action to protect Americans from the risk posed by digital assets, stating that he would continue to do so.
The response comes after a series of misfortunes facing the bank linked to its association with the crypto industry. On Friday, the bank announced that it would shutter its Silvergate Exchange Network (SEN), a tool that enabled settlements for cryptocurrency and fiat currencies 24 hours a day, seven days a week.
The move came days after the bank revealed in a March 1 document filed with the U.S. Securities and Exchange Commission (SEC) that it would postpone filing its yearly report. The bank cautioned that there was a possibility that it may not be able to continue operating as a “going concern” within the next twelve months, adding that it “is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.” It further disclosed that its business was likely to be threatened by “investigations from our banking regulators.”
Silvergate’s worries about its operations caused crypto-oriented companies such as Circle, Paxos, Coinbase, MicroStrategy and Bitstamp to back away with crypto exchange Gemini suspending its banking relationship with Silvergate.
Silvergate’s fall comes amid heightened calls by US banking regulators like the Federal Reserve and the Federal Deposit Insurance Corporation for banks to desist from engaging in crypto activities labelling the crypto industry as hazardous. In January, the two institutions issued a joint statement noting that they “believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public or decentralized network or similar system is highly likely to be inconsistent with safe and sound banking practices.”
Meanwhile, since March 1, Silvergate shares (NYSE: SI) have tumbled over 65%, resulting in a 97% drop from their all-time high in Nov. 2021.
