News has surfaced that the defunct Silvergate Bank was forced to limit its crypto deposits to 15% under threat of closure from US regulators, according to Nic Carter, a partner at Castle Island Ventures. In its heyday, Silvergate was a leading bank within the crypto industry until it succumbed to voluntary liquidation under the alleged regulatory pressures.
Carter, in a recent article, insisted that Silvergate had the potential to weather the storm and was showing signs of doing so before succumbing to regulatory pressure. He reveals that the Biden administration had imposed stringent conditions on the bank to cap its crypto deposit at 15% or risk hearing the death knell. Carter dubs these concerted efforts as “Operation Choke Point 2.0,” which holds the government responsible for any financial mishaps in the crypto industry.
Carter also pointed the finger at FDIC and US Senators like Elizabeth Warren, who had reportedly mounted unbearable pressure on other crypto-friendly banks until they shut down in early 2023. This pressure involved disclosing intricate details about their relationship and dealings with ex-bank clients. Silvergate, according to internal sources, made peace with the 15% cap to avoid regulatory strangulation.
Carter deems Silvergate’s peculiar decision to voluntarily liquidate rather than succumbing to FDIC receivership as evidence of the not-so-subtle governmental influence. Such cases have been incredibly rare over the past three decades, suggesting that Silvergate was forced into this unusual decision, not due to financial struggles but due to regulatory shackles.
Carter additionally noted that Silvergate might have survived if it weren’t for the alleged 15% cap imposed, given the rapid recovery of crypto firms’ balance sheets during the market rebound in late 2023. He conceded, though, that tighter anti-money laundering controls could have saved Silvergate from potential regulatory harassment that sealed its fate.