Venture capitalist Nic Carter has released a new article delving into the alleged downfall of Silvergate, Signature, and Silicon Valley Bank, following what he claims was an informal mandate from the Biden administration for banks to cap their crypto deposits at 15%. This revelation comes a year after Carter’s previous reports on Operation Choke Point 2.0.
In his latest article published on September 25, Carter focuses on Silvergate, the now-bankrupt Californian bank that provided cryptocurrency services. According to Carter, interviews with protected inside sources and bankruptcy filings indicate that Silvergate may have survived if not for pressure from regulators, including an alleged mandate to cap its crypto deposits at 15%.
The scrutiny on Silvergate intensified as financial regulators like the Federal Deposit Insurance Corporation and US Senators such as Elizabeth Warren raised concerns about the bank’s association with former client FTX. Despite never proving any criminal wrongdoing related to this association, Silvergate faced considerable political pressure.
Senator Elizabeth Warren’s accusations against Silvergate of aiding FTX’s alleged crimes created a climate of uncertainty around the bank, potentially contributing to a run on the bank. This pressure ultimately led to the Federal Home Loan Banks refusing to renew Silvergate’s monthly loan agreement, hastening the bank’s losses. An unnamed source from Silvergate revealed to Carter that the bank felt compelled to adhere to the 15% rule.
The existence of the 15% threshold was challenging to confirm due to its classification as confidential supervisory information. However, Carter argues that Silvergate’s downfall may have triggered the 2023 regional banking crisis, leading to the collapse of other crypto-affiliated banks like Signature, Silicon Valley Bank, and First Republic.
Carter also questions Silvergate’s decision to opt for voluntary liquidation rather than entering FDIC receivership, suggesting that the bank may have been driven to this choice by regulatory pressures rather than the bank run it experienced. The aftermath of the 2023 crisis saw similar patterns with other crypto-friendly banks like Customers and Cross River facing regulatory actions.
In May 2023, Cross River received a consent order from the FDIC regarding its fintech partnerships, while Customers Bank faced an enforcement action from the Federal Reserve Bank of Philadelphia in August 2024 for deficiencies in risk management practices and anti-money laundering compliance.
Carter believes that Washington’s efforts to dismantle crypto banks inadvertently sparked a regional banking crisis that extended beyond the crypto sector. Despite the fallout, he notes that there has been little criticism directed towards President Biden, Senator Warren, or the Fed for their roles in initiating the crisis while attempting to curb the growth of the crypto industry.
