Crypto bank Silvergate says it'll shut down as the market meltdown claims its 1st mainstream casualty

© SOPA Images/Getty Images Crypto-friendly bank Silvergate Capital said Wednesday that it will write off its assets and wind itself down. SOPA Images/Getty Images

Silvergate Capital said Wednesday that it plans to write off its assets and wind its business down.

The crypto-friendly institution has felt the brunt of rising interest rates and FTX's collapse.

Silvergate shares plunged 43% to under $3 in premarket trading Thursday.

Silvergate Bank has become one of the first mainstream victims of the crypto crash, saying that it plans to voluntarily write off its assets and wind itself down.

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"In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward," holding company Silvergate Capital said Wednesday.

Silvergate had established a reputation as the US's largest crypto-focused bank, with customer deposits of up to $14 billion. But the combination of the Federal Reserve's aggressive interest-rate hikes and FTX's collapse in November cast a shadow over its future.

Higher borrowing costs triggered a widespread selloff in risk-on assets last year, with crypto prices plunging.

Silvergate had also been a key financial institution for the now-bankrupt exchange FTX and its sister trading firm Alameda Research, with FTX clients wiring the bank money directly when depositing funds.

Customers have rushed to pull at least $8 billion from the bank since FTX's collapse. Unaudited financial statements covering the fourth quarter of 2022 showed that Silvergate held just $4.6 billion of cash as of December 31.

In a filing to investors last week, Silvergate had warned that it could be forced to close due to mounting problems including a pending US Department of Justice investigation into its operations.

Shares plunged 43% to under $3 in early trading Thursday, having peaked at over $200 during the peak of the crypto boom in 2021.

"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," Senate Banking Committee Sherrod Brown said in a statement. 

"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."

Read more: Troubled crypto bank Silvergate sees regulators swoop in to try to help it stay afloat