Chris Lane's Take on Silvergate Bank's Collapse

Chris Lane, the former Chief Technology Officer of Silvergate Bank, shared a "personal view" of the bank's downfall on X, attributing the blame to regulators for a perceived "bait and switch" maneuver, impacting a bank that was once a favorite in the cryptocurrency sector.

Overview of Silvergate Bank's Closure

In March 2023, Silvergate Bank voluntarily wound down and liquidated itself amidst a regional banking crisis in the U.S., which saw the closure of three mid-sized banks, including Silicon Valley Bank and Signature Bank, within five days. The bank's statement to the Securities and Exchange Commission indicated an orderly wind down was the best course of action.

Regulatory Blame Game

In the aftermath of its closure, several former executives have pointed fingers at regulators for a sudden shift that hindered Silvergate's ability to maintain its digital asset-focused business model. Lane, son of former CEO Alan Lane, recently expressed his views on X, stating that regulators introduced severe limitations on U.S. dollar deposits for digital asset clients in Spring 2023, effectively dismantling their business model.

External Influences

Prominent Washington figures criticized the crypto industry's volatility, particularly following the collapse of the FTX exchange in November 2022, which had received banking services from Silvergate. U.S. Senator Elizabeth Warren called the bank's failure disappointing yet predictable and noted concerns regarding its risk management practices.

Silvergate's Position

Despite the criticisms, Lane defended Silvergate's financial standing post-FTX collapse, asserting that the bank remained solvent and liquid, and claimed that regulatory actions significantly contributed to its demise.

Allegations of Coordinated Actions

Some in the crypto community have suggested that regulators' actions against the digital assets sector resemble "Operation Choke Point 2.0," a modern version of a 2013 initiative aimed at scrutinizing banks that dealt with risky financial ventures. Letters obtained in a lawsuit by Coinbase indicated that the Federal Deposit Insurance Corporation had urged some institutions to halt their crypto-related activities.

Call for Examination

In response to Lane's comments, David Sacks, who served as the Trump administration's incoming A.I. and Crypto Czar, highlighted the numerous accounts of harm resulting from Operation Choke Point 2.0, calling for a thorough investigation into the matter.