Regulators Put Silvergate’s Liquidation Under Binding Controls

The Federal Reserve Board and California’s Department of Financial Protection and Innovation announced on June 1, 2023 that Silvergate Capital Corporation and Silvergate Bank had entered a consent cease-and-desist order governing the crypto-focused bank’s voluntary liquidation.

The announcement did not initiate Silvergate’s collapse. Silvergate had announced its wind-down on March 8, 2023, and the order itself became effective on May 23, 2023. June 1 was the date regulators made the order public and Silvergate filed its terms with the Securities and Exchange Commission. That chronology turns the day’s development into a regulatory-control milestone, not a new liquidation decision.

Regulators put the wind-down on rails

The order required Silvergate to submit, within 10 days of the order, a self-liquidation plan acceptable to the DFPI and the Federal Reserve Bank of San Francisco. Once approved, the company and bank had to adopt and implement it; they could not change or revoke it without written supervisory consent.

The plan had to protect depositors and the Deposit Insurance Fund to the fullest extent possible. It also had to preserve enough staffing and operational capacity to serve depositors, recover loans and securities with depositor funds prioritized, reduce liabilities in an orderly way, maintain records and comply with other regulatory or judicial obligations.

Silvergate represented that the liquidation would repay all bank deposits in full. That was the company’s representation recorded by the regulators, not confirmation on June 1 that every depositor had already been paid. The bank planned to liquidate outside a Federal Deposit Insurance Corporation receivership, another reason not to describe the order as an FDIC takeover.

Cash, distributions and growth were restricted

The consent order immediately constrained how value could leave the organization. Silvergate could not pay dividends, repurchase shares or make other capital distributions without prior written approval. It also had to preserve cash assets, with exceptions for expenses necessary to operate and payments consistent with the liquidation plan.

The bank could not accept additional brokered deposits, enter new lines of business, pursue expansion or open branches without supervisory approval. It had to preserve documents and data, provide quarterly progress reports and continue assisting the Federal Reserve and DFPI with their investigation into Silvergate’s relationship with FTX and Alameda and transactions over the Silvergate Exchange Network.

An investigation is not a finding of misconduct. The order says it settled the matter without a formal proceeding, testimony or adjudicated findings of fact or law. Its recitals nevertheless state that recent examinations had identified numerous safety-and-soundness and compliance deficiencies.

Why Silvergate mattered to crypto markets

Silvergate was not simply a bank that happened to hold a few digital-asset clients. The order says the bank had pursued a crypto-industry strategy since at least 2013. Its Silvergate Exchange Network provided near-real-time transfers of U.S. dollars between participating customers’ accounts, giving exchanges and other crypto businesses a bridge between continuous digital-asset trading and conventional bank money.

The order linked Silvergate’s funding and liquidity stress to substantial deposit declines beginning in the fourth quarter of 2022, triggered in part by the collapse of FTX and Alameda. It also recorded declining activity in businesses that had been important revenue sources. These are the regulators’ contemporaneous findings and attributions; this reconstruction does not use later enforcement outcomes to enlarge them.

The institutional significance on June 1 was therefore narrower than a verdict on crypto banking generally. Federal and state supervisors had converted a privately announced shutdown into a monitored process that prioritized depositors, cash preservation and regulatory cooperation. The action also illustrated concentration risk: when a bank’s deposit base and payment infrastructure are closely tied to one volatile industry, stress inside that industry can become a bank-liquidity problem.

What remained unresolved

The June 1 record did not establish when the liquidation would finish, whether every asset would be recovered at book value, or what regulators’ FTX-related investigation would conclude. It supplied a binding process and reporting duties, not a completed payout or final investigative result.

No token, equity or deposit-flow price claim is made here, so there is no market instrument or price-measurement window to report. The next event-day questions were whether supervisors would approve the plan, whether deposits would be repaid as represented and whether the wind-down could remain outside receivership.