Silvergate, the US bank that offers cryptocurrency services, has reported that its clients have withdrawn over $8 billion (£6.7 billion) of their cryptocurrency-linked deposits over the past several weeks. 

In the final three months of 2022, roughly one-third of the bank's customers pulled their deposits from the bank. The bank sold assets worth $5.2 billion to cover the cost and maintain liquidity. 

According to three US regulators, issuance or holding crypto would conflict with safe and sound banking practices as it would be "highly likely that such practices would be compromised." 

Listed on the New York Stock Exchange, Silvergate is a bank regulated by the New York Stock Exchange and a part of the financial sector. A few businesses within this sector offer cryptocurrency services, and this business is one of the very few. Before the November bankruptcy filing of FTX, the crypto exchange was once valued at $32 billion. Withdrawals followed the collapse of the FTX exchange. 

A former FTX boss has pleaded not guilty to charges that he defrauded customers and investors as part of his role at the company. Approximately one million credits may have been affected by bankruptcy, according to prosecutors. 

Cryptocurrencies have been affected by the case, leading to bankruptcy filings at other companies and the price of crypto falling. 

Silvergate's chief executive officer, Alan Lane, said the bank had sold assets to cover customer withdrawals to compensate for the trading risks associated with digital assets "in response to increasing changes in the digital asset market." It seems that Silvergate has also fallen victim to the chilling "crypto winter" that has been devouring the cryptocurrency industry since last spring. 

As the name implies, the so-called crypto bank fills an unusual position in the market, serving as a bank for cryptocurrency companies that had difficulty finding banking services that could be offered by traditional banks. 

An Alameda Research company, which is now bankrupt, is owned by Sam Bankman-Fried. He is suspected of fraud and is awaiting trial in the United States. There is no doubt that Bankman-Fried's downfall has been a blow for Silvergate, but the risk of market confidence has been a more risky blow to the company. In the aftermath of Bankman-Fried's collapse, several small and large investors have pulled their money out of crypto companies, transferring billions of dollars from crypto accounts stored by companies. 

Binance and Coinbase have so far survived the unprecedented withdrawals of users and have become some of the biggest names in the industry. While it seems that Silvergate is also weathering the storm, its balance sheet is taking a heavy hit as a direct result of the storm. 

Before entering the world of cryptocurrency, in November 2019, Silvergate was a small US bank that had recently been made public. The shares of the company had grown by more than 1,500% by the time the market reached its climax in 2021. This was mainly due to the massive growth of crypto during this period. There was a period during which it attempted to launch its stablecoin. During this period, it tried to create a cryptocurrency directly tied to an asset such as gold, the US dollar, or another cryptocurrency. 

Additionally, Silvergate spent $182 million in January 2022 to acquire the technology used in Meta's proposed Diem (formerly Libra) stablecoin, which is yet to hit the market. According to a filing filed with the US Securities and Exchange Commission (SEC), the bank said it had sold the debt to cover withdrawals from its accounts. It said that the purchase of the diem is no longer classified as an asset, indicating that the purchase has been written off. The bank has also deducted its workforce by 40% - about 200 people. Since 2013, withdrawals have cost the company $718m in losses, an amount greater than its profit.