3. December 2023

• Silvergate Capital, a Federal Reserve Member Bank, has seen its stock price plummet as depositors flee.
• This is due to the lack of regulation around KYC/AML policy in the crypto industry and issues with unregistered security offerings and fraud.
• Silvergate plays a key role in providing USD on- and off-ramps for crypto firms, but there is an ongoing risk of bank run on their deposits.

Trouble Brewing In Crypto-Land

Regulation Challenges

The crypto sector has had difficulty gaining access to established USD on- and off-ramps due to the lack of regulation around know-your-customer (KYC) and anti-money laundering (AML) policy that exists in the industry for offshore entities. Additionally, there have been issues with unregistered security offerings and plenty of fraud within the broader industry. These concerns have led to few regulated U.S. banks willing to work with crypto firms.

Silvergate’s Role

Silvergate Capital is one of two key U.S. banks that works closely with the crypto sector, along with Signature Bank. Silvergate played a role in serving FTX and Alameda by giving them access to USD rails prior to FTX’s collapse in November 2020. Since then, there has been concern about a potential bank run on Silvergate deposits due to their involvement in the crypto space, which has caused their stock price to drop significantly over recent weeks.

Risk Assessment

Although Silvergate’s CEO has tried to reassure markets that their current loan book has faced zero losses or liquidations so far, leveraged loans are collateralized with bitcoin that can be liquidated as necessary if needed – meaning there is still an ongoing risk of a complete bank run on their deposits despite reassurances from executives within the company.


The developments around cryptocurrency on- and off- ramps have highlighted both risks and opportunities associated with involving traditional banking institutions in this space – as well as highlighting some of the challenges posed by inadequate regulation surrounding KYC/AML policy within the industry overall. As such, it will be important for investors and companies alike to monitor any changes that could affect this situation going forward so they can make informed decisions about how best to approach operations within this space moving forward