A new perspective on the downfall of Silvergate Bank, once a major banking provider to the cryptocurrency industry, came from Castle Island Ventures partner Nic Carter. In a September 25, 2024 article for Pirate Wires, Carter argued that regulatory pressure played a major role in forcing Silvergate to wind down. He pointed to what he described as an informal 15% limit on crypto-related deposits and connected the claim to his “Operation Choke Point 2.0” theory.
Carter based his account on bankruptcy filings and conversations with people familiar with the bank. He argued that pressure from regulators and lawmakers made it difficult for Silvergate to continue operating as a crypto-focused institution. He also questioned the bank’s decision to voluntarily liquidate rather than enter FDIC receivership.
Regulatory pressure was only part of Silvergate’s problems
Carter’s account is important because it highlights a debate over whether US regulators were discouraging banks from serving crypto businesses. The FDIC released 175 documents related to its supervision of banks involved in crypto activities in February 2025, after questions about whether regulators had used informal communications to restrict such activities.
However, the public record also documents problems inside Silvergate. The FDIC said the bank lost 68% of its deposits during the fourth quarter of 2022 as digital-asset customers withdrew funds following the FTX collapse. Silvergate then sold securities to meet withdrawals, recording a $1 billion net loss.
The SEC separately alleged in 2024 that Silvergate had misled investors about its Bank Secrecy Act and anti-money-laundering controls. According to the SEC, the bank’s automated monitoring system failed to monitor more than $1 trillion in transactions on its Silvergate Exchange Network and failed to detect nearly $9 billion in suspicious FTX-related transfers.
These findings complicate any single-cause explanation for the bank’s collapse. Regulatory scrutiny may have increased the pressure on Silvergate, but liquidity stress, concentration in crypto-related deposits, exposure to the fallout from FTX and compliance weaknesses were also documented factors.
Also Read: Silvergate Bank’s Exit: A Turning Point for Crypto Banking?
Silvergate’s legacy and the banking debate
The dispute has continued beyond Silvergate. In March 2025, the FDIC rescinded earlier guidance requiring banks to obtain prior approval before engaging in permissible crypto-related activities. The agency said banks could pursue such activities if they adequately managed the associated risks.
That change does not establish Carter’s allegations about Silvergate, but it does show that the regulatory approach to crypto banking changed after the 2023 crisis. The FDIC’s document release also gave researchers more material to examine how regulators communicated with banks during that period.
Silvergate itself is no longer operating. The Federal Reserve confirmed in July 2024 that the bank had completed its liquidation and wind-down. For the crypto industry, its collapse remains a case study in the risks of relying on a small number of specialized banking providers.
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