Silvergate and Signature Bank: banking failures that hit crypto in 2023

Why do crypto firms depend on banks like Silvergate?

Crypto firms hold coins on a blockchain, but their customers pay in dollars and euros. Every deposit and withdrawal in a national currency passes through a bank. A bank that accepts crypto clients therefore works as the entry and exit door of the market.

Few banks accepted that role in 2022. The ones that did gathered large deposits from exchanges and other firms, and this gave them a strong position and a concentrated risk at the same time. A single industry can supply a growing share of funding in good years and withdraw it just as fast in bad years.

What happened to Silvergate Bank and its payments network?

Silvergate ran the Silvergate Exchange Network, or SEN, a real-time payments system that let crypto exchanges, institutions and customers exchange fiat currencies such as US dollars and euros. By the third quarter of 2022, SEN customers held about $12 billion in deposits.

After the FTX collapse and a drop in crypto prices, deposits fell to $9.8 billion by 5 December 2022 and to $3.8 billion by December 2022. On 8 March 2023, Silvergate announced that it would wind down its operations and liquidate, one of the first failures of the 2023 US banking crisis.

How did Signature Bank close in March 2023?

New York state banking officials closed Signature Bank on 12 March 2023, 2 days after Silicon Valley Bank failed. The FDIC was appointed receiver and set up a bridge bank to run the institution while it sold assets. The bank held about $110 billion in assets at closure.

Signature also ran Signet, a payment network launched in 2019 for approved clients, which settles fund transfers in real time over a blockchain. By the end of 2020 it had 740 clients. The network placed Signature close to the crypto industry’s daily payments.

How large were the crypto deposits at Signature Bank?

Crypto-sector clients provided over 16% of Signature’s deposits in 2021 and about 30% by February 2023, according to the public account of the bank. Sources differ on one detail, since the lead of the same account places the 30% level in 2021, so a careful reader cites the range.

A bank with 30% of deposits from one sector depends on that sector. If the sector faces stress, withdrawals rise together, and the bank must raise cash quickly. This is concentration risk, and it applies to any lender that serves one industry.

What happened to Signature Bank after the closure?

On 19 March 2023, the FDIC announced that New York Community Bancorp would assume certain deposits and loans. Its Flagstar Bank subsidiary absorbed the 40 branches effective 20 March. About $4 billion in digital asset deposits and roughly $60 billion in loans were excluded from the deal.

The exclusion shows that the buyer did not take the crypto deposits. Crypto firms that had banked with Signature had to find another route for dollar payments, and the loss of Signet and SEN together left a gap in the market.

How did the Silvergate liquidation end?

Silvergate chose a voluntary liquidation. All deposits were repaid by November 2023, and banking operations ceased shortly after. Silvergate Capital filed for Chapter 11 bankruptcy on 18 September 2024 and surrendered its bank charter after settling with regulators.

For depositors, the orderly repayment is an important contrast with exchange failures. A bank under supervision repaid deposits in full, while several exchange and lender failures left customers in bankruptcy queues.

How does concentrated crypto funding turn into a bank run?

A bank lends or invests most of the deposits it takes, and it keeps a share in cash for withdrawals. If deposits come from one industry, the withdrawals of that industry arrive together. Silvergate’s deposits moved from about $12 billion in the third quarter of 2022 to $3.8 billion by December 2022, a fall to roughly a third in months.

A bank that must sell assets quickly to meet withdrawals may sell at a loss, and the loss weakens confidence further. The sequence is the same one seen in the stablecoin and lender failures of 2022: a shock, a rush for the exit, and a forced sale. Bank rules differ from the rules of exchanges and lenders, and Silvergate depositors were repaid in full.

How did the bank failures reach the wider crypto market?

The failures did not change any coin’s design. They changed access: fewer ways to move dollars in and out meant slower settlement, wider price gaps between platforms and more reliance on the remaining banks. Payment rails are infrastructure, and infrastructure risk is a market risk.

Silvergate’s deposits had already fallen after the FTX collapse. The 2 stories connect: a confidence shock at an exchange became a withdrawal shock at the bank that served it.

What can a reader check about banks that serve crypto firms?

4 checks apply. Ask which banks hold the firm’s cash. Ask whether the firm uses more than 1 bank. Ask what share of the bank’s deposits comes from crypto. Ask how quickly the firm can switch payment rails. Answers in writing turn a worry into a plan, and a plan with 2 banks and 2 payment routes holds up better than a plan with 1.

The EQOS Asia method page shows how such checks feed a structured score, and the contact page lets you bring a counterparty question from your own treasury.

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About the author

Stéphane Jambu

President, EQOS Forecast Asia

Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile