Silvergate’s Collapse Linked to Regulatory Pressure: Carter

Silvergate Bank’s downfall has been the subject of heated debate especially after Nic Carter, a partner at Castle Island Ventures, weighed in on the matter. He commented that the bank’s failure wasn’t just an internal issue but also due to regulators’ attempt to limit the growth of crypto banking.

My latest in @PirateWires:

Inside the Biden Admin’s Plot to Destroy Silvergate and Debank Crypto for Goodhttps://t.co/qGsSoi3aCG

— nic carter (@nic__carter) September 25, 2024

The Fall of Silvergate

Silvergate, which was once at the top of the crypto banking world, had decided to close down last year. As per Carter, this wasn’t just a random occurrence. In his report, Carter mentions that the Silvergate crash played a key role in U.S.’s current crypto space and without the 15% cap on crypto deposits, the bank would still be thriving today. He refers to this regulatory strategy by President Joe Biden’s administration as “Operation Choke Point 2.0″ which is meant to quietly push crypto-friendly banks out of the picture. 

A spokesperson from Silvergate said, 

They have eight million ways to shut us down, any way they want. When they say you gotta do something, you do it. The caps were never publicly discussed or formally opposed as a rule, but when your primary regulator threatens you, you comply.

Parallel Narratives

Silvergate’s decision to liquidate was unusual in banking, like waving a white flag and signaling external forces at play. However, this was not limited to Silvergate.  For Instance, in the case of Paxos Trust, after Signature Bank closed in 2023, Paxos had to reassure its customers that their assets were safe despite the shockwaves. This just goes to show how quickly things can get shaky in the world of crypto banking when a bank suddenly closes.

Carter’s main argument is that regulations like these might be doing more harm than good. While they want to protect the financial system, they could end up pushing innovation out of the country and stifling the crypto industry.

To sum up, Carter believes Silvergate’s liquidation was less about fixing the bank’s issues and more about holding the crypto industry back. It raises important questions about where crypto banking is headed and how much regulation is actually helpful.