Crypto banking giant Silvergate, one of the first dozen financial institutions to offer full banking services to cryptocurrency exchanges and custodians, is planning to shut down after just three years of operations. The unexpected news has sent shockwaves through the crypto community and many wonder what went wrong.
Silvergate was formed in September 2017 with the goal of bridging the gap between the digital asset industry and the traditional banking sector. It aimed to provide bank accounts for digital currencies, digital currency ATMs, and trading platforms. The company initially became popular with digital asset holders, providing services at a fraction of the costs of traditional banking services. However, it soon ran into trouble after its banking license was not renewed.
The banking license was not renewed due to the company’s inability to meet certain regulatory requirements, including accounting for the full movement of funds and adequate customer protections. Without the renewal of the license, Silvergate was no longer able to offer certain services such as exchange and ATM banking. As a result, Silvergate’s business model became untenable and it was forced to shut down.
The news has led to disappointment within the crypto community as it was seen as a major step forward for the industry. Silvergate was a prime example of the progress being made in the acceptance of digital asset services and its closure is a setback for the industry.
The closure of Silvergate is yet another reminder of the often treacherous roads that lie ahead for companies in the cryptocurrency space. Regulations are constantly changing and companies must remain agile and mindful of the regulations in order to remain any service. In addition to meeting current regulations, companies must also be flexible and able to adapt to the ever-changing landscape.
For now, Silvergate’s shiny hinges will stay rusted and we can only hope that its loss will not discourage similar ventures from taking the plunge into the digital asset space.