Blame Silvergate's collapse on risky crypto, Elizabeth Warren says - but others slam 'arsonist and firefighter' crackdowns. 10 top experts on what pushed the bank to fail.
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- Mainstream bank Silvergate, once a go-to for big crypto firms, will close down after troubles mounted.
- Debate is raging over whether a volatile crypto sector or traditional banking risks are to blame.
- Here's what Elizabeth Warren, Mike Novogratz, Binance boss CZ and 7 other top voices had to say.
Silvergate Capital, the mainstream bank that was once a key player in bridging a gap in the cryptocurrency industry, decided to write off its assets and close down Wednesday, only days after flagging doubts about its survival.
Its downfall comes after months of mounting problems, as the crypto world was shaken by a market rout and the fallout from FTX's collapse late last year. Deposits at Silvergate plunged, and its stock price has plummeted 96% over the past year.
But not everyone sees the crypto world and its risks as the culprit in Silvergate's demise. Some point to the Fed's interest rate hikes putting pressure on all corners of finance — and others, to regulators' stepped-up crackdown.
Here's what crypto players, influential investors and other experts have to say.
Sen. Elizabeth Warren, backer of tougher crypto regulation
"As the bank of choice for crypto, Silvergate Bank's failure is disappointing, but predictable. I warned of Silvergate's risky, if not illegal, activity — and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk," Senator Elizabeth Warren said in a tweet.
Mike Novogratz, CEO of crypto financial services firm Galaxy Digital
"She's just so smart. Ask her about MMT! Seems like a brilliant idea. $BTC couldn't ask for a better partner!" Mike Novogratz tweeted in a sarcastic jab at Warren's comments. (MMT refers to the Modern Monetary Theory)
Nic Carter, partner at VC firm Castle Island Ventures
"A single small bank fails (in a generally elegant way — not clear there are any actual 'bad consequences' beyond shareholders losing money?) and this vindicates a crackdown on an entire legal industry? What kind of completely bizzaro reasoning is that," Carter tweeted.
"The government also hastened the collapse of silvergate by launching investigations and legal attacks on them. They're the arsonist and the firefighter in one," he said.
Activist investor Ross Gerber
"FTX and it's criminal mastermind SBF kills off another major crypto institution. Silvergate Bank RIP," the Gerber Kawasaki CEO tweeted.
Binance CEO Changpeng "CZ" Zhao
"Sad to see this happening. But at least, it seems they will return all deposits in full. Protect users," he tweeted.
Scott Melker, Wolf of All Streets podcast host
"Silvergate's collapse is exactly the ammo the government needs to try to cut the crypto industry off from the banking system," Melker tweeted.
Sherrod Brown, chair of the Senate Banking Committee
"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," Sen. Brown said.
"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."
Sheila Bair, former chair of regulator FDIC
"Silvergate's troubles are as much if not more about traditional banking risks — lack of diversification, maturity mismatches — as it is about its exposure to crypto," said Bair, who was FDIC head during the global financial crisis.
Adam Cochran, a partner at venture capital firm CEHV
"Silvergate didn't fail because of crypto risk, or because of illegal actions (that we know of)," tweeted Cochran, who is active in DeFi projects.
"It failed because it followed the OCC rules for bank partial reserves, bought low liquidity Muni Bonds and then had a bank run."
"This was a failure of banking, not crypto."
Dave Weisberger, CEO of crypto-trading platform CoinRoutes
"The problems that faced Silvergate were primarily a result of less-than-adequate risk management, notably one of relying too much on volatile short-term deposits while lending or investing at a longer duration," Weisberger said.
"This is not like the collapse of FTX, where investors lost their deposits, but, rather, an orderly dissolution," he added.