Was Silvergate Bank’s Downfall a Result of Regulatory Pressure?

The former crypto-friendly institution, Silvergate Bank, might have weathered its challenges if it hadn't faced intense regulatory pressure leading to its voluntary liquidation, according to industry insider Nic Carter.

In a recent article for Pirate Wires, Carter suggested that the bank was on a recovery trajectory before being told by the Biden administration to limit its cryptocurrency deposits to 15% or face serious repercussions.

Carter coined the term “Operation Choke Point 2.0” to describe what he believes is a coordinated effort by U.S. regulators to stifle banks involved with crypto, particularly during the banking crisis of 2023. He argues that such actions directly contributed to the collapse of several crypto-friendly banks, including Silvergate, Signature Bank, and Silicon Valley Bank.

Carter claims that Silvergate faced extraordinary pressure from the FDIC and lawmakers, leading to a directive that left the bank with no viable options but to comply. An insider indicated that failure to adhere to the imposed limit could have resulted in severe consequences.

He expressed skepticism regarding Silvergate’s decision to voluntarily liquidate, noting that such moves are infrequent in the banking sector and suggesting it was forced by regulatory actions rather than market conditions. The resurgence of crypto firms in late 2023 further led Carter to believe that Silvergate could have thrived without the imposed restrictions.

While he recognized Silvergate’s lapses in areas like anti-money laundering practices, he maintained that these shortcomings did not warrant the extreme measures that led to the bank’s downfall. His comments come as Vice President Kamala Harris emphasizes the importance of maintaining U.S. leadership in blockchain and other emerging technologies.