blissfulsats on Nostr: LEAD STORY Silvergate Repaid Its Depositors. Its Customers Still Lost Their Bank. Al ...

LEAD STORY
Silvergate Repaid Its Depositors. Its Customers Still Lost Their Bank.

Al Lane is a good friend, and I am very confident in his account of what happened at Silvergate. When I read his essay on the liquidation, published yesterday, I see a banker who did the hard thing, protected his depositors and lost his bank anyway.

Silvergate met a run of roughly 70% of demand deposits, according to Al. Contemporary company disclosures put digital-asset customer deposits at $11.9 billion at the end of September 2022 and $3.8 billion at the end of December. That is an extraordinary amount of money to pay out under pressure. How many banks in the United States could withstand withdrawals on that scale and still make every depositor whole? I would not bet on many.

The Federal Reserve confirmed in July 2024 that Silvergate had completed its liquidation and repaid all customer deposits. On the most basic obligation a bank has to its depositors, Silvergate delivered. Al and his team did right by the people whose money they held.

Think about what those customers lost anyway.

Silvergate had built dollar payment infrastructure for an industry that never closes. Its Silvergate Exchange Network let customers move dollar deposits between participating accounts around the clock. For a bitcoin business operating on a Saturday night, that mattered. The bank understood its customers and built a service around how they actually worked.

My view is that they were punished for serving the wrong clients in the eyes of the Biden administration. They met an extraordinary run. Their customers got their money. Washington still made continuing to serve those customers untenable.

We covered the evidence in September 2024, including Elaine Hetrick's sworn account and Caitlin Long's analysis of Operation Chokepoint 2.0. Hetrick's declaration described a bank that had stabilized and could continue serving its remaining customers, but faced supervisory pressure that forced it to consider a different business, a sale or liquidation. That account is consistent with what Al is telling us now.

Then look at what the Fed did for the rest of the banking system.

Silvergate announced its wind-down on March 8, 2023. On March 12, the Fed announced the Bank Term Funding Program. Four days later. The program offered eligible institutions loans of up to one year against qualifying securities valued at par, rather than their depressed market prices. The Fed said the purpose was to eliminate the need to sell those securities quickly in times of stress.

Months after Silvergate had met its enormous deposit outflows, and days after it announced its liquidation, the Fed created a facility to help other banks avoid forced securities sales. Separately, the government protected all depositors at Silicon Valley Bank and Signature Bank, including uninsured depositors. Those protections did not save those banks' shareholders, and the BTFP was a broadly available lending facility, not a grant to a named favorite. But the contrast in Washington's response is impossible for me to ignore.

When the pressure was concentrated on a bank serving bitcoin businesses, the outcome was a wind-down. When the stress spread, officials found a way to lend against securities at face value. I see hypocrisy and political favoritism in that sequence. The people overseeing the system were willing to change the terms when a different set of banks needed help.

The Fed's inspector general criticized Silvergate's governance and risk management, and Lane settled SEC compliance-disclosure charges without admitting or denying them. Those proceedings are part of the record. They do not explain away the contrast between a bank that repaid its depositors and the emergency support Washington assembled for the wider system.

The withdrawal of the agencies' crypto-related joint statements in 2025 was welcome. It did not give Silvergate's customers their bank back.

I do not want access to money resting on the judgment of a relatively small group of officials. A business can be legal and still find that nobody wants the regulatory trouble of banking it. You do not need Congress to outlaw the business if the people controlling its access to dollars can make it too expensive to serve.

Bitcoin does not eliminate dollar payroll, suppliers or tax bills. We should keep fighting for lawful businesses to have access to banking. But we should also build more commerce around money that does not require a bank to maintain an account for either side of the transaction.

With bitcoin held in your own custody, an official's discomfort with your industry does not give them a key to your savings. I would rather build around that property than the goodwill of whoever happens to be running the banking agencies this year.
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