This is the story of a bank boss, devout Catholic and grandfather of 21 grandchildren, who bet everything on bitcoins.

Alan Lane runs a small regional American bank which, like the frog in La Fontaine's fable, wanted to become the beef of the crypto universe.

And who has just collapsed.

The Californian bank Silvergate announced, Wednesday, March 8, its intention to reduce its activities for a bankruptcy which seems to be “the most realistic outcome”, according to a press release.

A bank that has bet everything on cryptocurrencies

Silvergate thus becomes the first traditional bank to succumb to the cryptocurrency crisis that has raged since the resounding bankruptcy of the FTX trading platform in November 2022. traditional finance.

Except that in this case “Silvergate remains a special case since it is a bank which decided very early on to adopt a strategy almost exclusively focused on cryptocurrencies and which is paying the price today” , summarizes Nathalie Janson, economist and cryptocurrency specialist at Neoma Business School.

The main American financial regulatory authorities, such as the SEC (Security and Exchange Commission, the financial market regulator) have not rushed to Silvergate's bedside "while they are doing everything to find a buyer when a systemic financial institution threatens to collapse”.

In fact, Silvergate, which has been around for 30 years, has done everything over the years to become the “crypto bank”.

For her, the “revolution” of bitcoins and other dematerialized currencies “was the way to move from the status of small regional bank to a major financial institution”, underlines the Financial Times. 

In the early 2010s, it was still a small bank specializing in home loans, one of the few in the United States to have managed to survive the 2008 subprime mortgage crisis without too much damage.

Riding on this success, Silvergate begins to want to entice new customers.

But where to find it?

Alan Lane, alongside a very active parish life, was also interested at the time in a new monetary fashion on the Internet: bitcoin.

In 2013, he made his first purchase. 

Collateral victim of FTX

The CEO of Silvergate then has a revelation: all players in this new growing sector must really need a bank?

Intelligence taken, the Kraken, Gemini, Paxos - among the most prominent start-ups in the crypto world at the time - have difficulty finding bankers who accept deposits in bitcoin or give them loans, says CNBC , who devoted an article to Alan Lane in 2018. It must be said that at the time, bitcoin was essentially associated with the world of cybercrime… for the few bankers who had heard of it.

Alan Lane sees this as an opportunity.

Silvergate then began a strategic shift that resulted in a decline in traditional banking activities and a reassignment of employees to meet the needs of these new 2.0 customers.

“Silvergate even boasted on its site of being the bank that did business with those who had been snubbed by other financial institutions”, underlines Alexandre Baradez, financial analyst for IG France who works on the cryptocurrency sector.

>> FTX scandal: the Who's who of the incredible debacle in the kingdom of cryptocurrencies

An in-depth transformation which for a long time seemed to succeed at this bank.

It goes from around twenty customers from the world of blockchain, bitcoins or even ethereum to more than 1,000 in 2022. The money is starting to flow.

In 2020, Silvergate has $2 billion in cryptocurrency-related deposits, up from $16 billion in September 2022. 

Silvergate has succeeded in its bet: to become the banker of the stars of this new economy, such as Coinbase… or FTX.

At the time of the collapse of this platform, “more than 90% of all deposits on Silvergate accounts were related to cryptocurrencies”, underlines Nathalie Janson.

In the end, “Silvergate was a collateral victim of FTX”, notes Alexandre Baradez.

The shock wave of the bankruptcy of the empire of Sam Bankman-Fried, the CEO of FTX, leads to massive withdrawals of money from Silvergate accounts.

Between September and December 2022, available funds were halved and the bank announced a billion dollar loss in the fourth quarter.

End of an era?

This probable bankruptcy is likely to make life harder for all players in the sector.

Who will start-ups turn to to lend them money and manage their account?

“It all depends on how this story will end.

If during liquidation parts of Silvergate's business are taken over, there can be a smooth transition.

But if the bank disappears purely and simply, it is certain that there will be a vacuum for a while”, estimates Nathalie Janson.

But the importance of the announced disappearance of Silvergate is "above all symbolic", assures Alexandre Baradez.

“After the bankruptcy of the main exchange platform in the crypto world, it is its main bank that threatens to disappear.

Two pillars of this ecosystem are collapsing."

For him, this is a sign that a chapter in the history of cryptocurrencies is closing.

The days of the cryptocurrency wild west - a world without sheriffs or regulation - would be coming to an end.

“Investors will now ask for a lot more guarantees, and banks will no longer bet as big on this sector without covering their backs”, predicts Alexandre Baradez.

He judges that the end of Silvergate is a short-term evil, for a longer-term good.

Perhaps it would be the advent of a cryptocurrency world free of those weeds, driven from crypto lands by more active regulators in this sector.

Waiting for a new crypto-frog to swell to the point of exploding.

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