Crypto bank Silvergate says it'll shut down as the market meltdown claims its first mainstream casualty

• Silvergate Capital said Wednesday it plans to write off its assets and wind its business down.
• The crypto-friendly bank has felt the brunt of rising interest rates, FTX's collapse ad .

Silvergate Capital has become one of the first mainstream victims of the crypto crash, saying that it plans to voluntarily write off its assets and close its bank down.

The move comes after Silvergate — which used to be the go-to bank for the biggest names in crypto — warned last week it was evaluating its ability to stay in business, thanks to mounting problems including a pending US Department of Justice investigation into its operations.

"In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward," Silvergate Capital, the holding company for Silvergate Bank, said Wednesday.

The company said it plans to fully repay all deposits.

Silvergate had established a reputation as the US's largest crypto-focused bank, with customer deposits of up to $14 billion. But the combination of the Federal Reserve's aggressive interest-rate hikes and FTX's collapse in November cast a shadow over its future.

Higher borrowing costs triggered a widespread selloff in risk-on assets last year, with crypto prices plunging.

Silvergate had also been a key financial institution for the now-bankrupt exchange FTX and its sister trading firm Alameda Research, with FTX clients wiring the bank money directly when depositing funds.

Customers have rushed to pull at least $8 billion from the bank since FTX's collapse. Unaudited financial statements covering the fourth quarter of 2022 showed that Silvergate held just $4.6 billion of cash as of December 31.

"As the impact of FTX's collapse continues to ripple outward, today we are seeing what can happen when a bank is overreliant on a risky, volatile sector like cryptocurrencies," Senate Banking Committee Sherrod Brown said in a statement.

"I've been concerned that when banks get involved with crypto, it spreads risk across the financial system and it will be taxpayers and consumers who pay the price."

After Silvergate flagged its troubles last week, big crypto players like Coinbase, Circle, Galaxy Digital, and Paxos scrambled to cut ties with the bank. It then closed its Silvergate Exchange Network, a major payments network hub for the crypto industry that was a key attraction for depositors.

Last week, Exness strategist Wael Makarem warned of the potential fallout for the crypto market and industry.

"Fears are growing that a crypto-focused bank failure could constitute a new hit to investors' confidence after the bankruptcies of major crypto players during the last few months," Makarem told Insider last week.

"As a result, the market could be exposed to new price corrections while investors could be concerned about a potential impact on other market players," he said.

Silvergate shares plunged 43% to under $3 in early trading Thursday, having peaked at over $200 during the peak of the crypto boom in 2021.

Read more: Troubled crypto bank Silvergate sees regulators swoop in to try to help it stay afloat