You must have noticed that Silvergate Bank, the bank of the crypto world, is in serious financial trouble right now. Measured from the beginning of 2023, the share is at a minus of 70.31 percent and if we look over the past six months, it is even a drop of 93.94 percent. To avoid bankruptcy, it is now in talks with the American FDIC.
What is the FDIC?
The abbreviation FDIC stands for “Federal Deposit Insurance Corporation” and is an independent organization of the US federal government that was founded in 1933 during the Great Depression to ensure the stability of the banking system and protect bank customers.
In the United States, the FDIC insures up to $250,000 in bank balances per bank. This means that if a bank goes bankrupt, people can get at least that amount back from the FDIC. This creates confidence in the banking system and encourages people to put money in the bank.
In addition, the FDIC is tasked with regulating and supervising banks to ensure they are safe and sound. This includes checking their financial health, risk management and regulatory compliance.
The focus of the FDIC is now on Silvergate Bank, which has been in serious trouble for a while. If it succeeds in avoiding bankruptcy, the American people can save a lot of tax money, because otherwise they have to pay out large amounts of insurance.
Last week, Silvergate Bank was required by law to present its annual 10-K report. This gives investors insight into the company and the financial health of the bank. After Silvergate announced that the publication of the report has been delayed, concerns about the financial condition of the bank increased.
Silvergate itself also admitted in that statement that it is “assessing the impact of the volatility in the market and the bankruptcies of some major players on the bank’s ability to survive the next 12 months.” With this they are actually saying that they are not sure whether they will survive this year.
Not long after, news broke that some major parties cut their ties with Silvergate and that Circle (see above) is considering doing the same. All in all, this is another exciting situation for the crypto industry.