And We Are Approaching the Crypto Event Horizon

The bank that is laughably the most cryptocurrency involved bank in the word, and a primary source for dollar liquidity for much of the in the world, Silvergate Bank, appears to be in an unrecoverable death spiral.

They have been unable to file their 10-K, which is required for all public companies in the United States, in large part because their auditor is unwilling to certify their numbers.

Bombs away:

Silvergate Bank, the US dollar banker to the crypto world, is having issues. The latest red flag: Silvergate is unable to file its 10-K annual report for 2022 on time, and it won’t even be able to meet an extended March 16 deadline.

In a late filing notice to the SEC, the California bank said it was not sure it could survive as a “going concern.” [NT-10-K notice of late filing]

Silvergate is toast. We suspect the FDIC will be swooping in sooner rather than later to sell the bank or liquidate its assets.

………

Amongst other reasons for delaying its accounts, Silvergate needs additional time to “complete management’s evaluation of internal controls over financial reporting.”

That is: someone inside the bank may have been fiddling the books. At absolute best, they were sloppy.

Silvergate’s auditors, Crowe LLP, have refused to sign off on the Q4 2022 accounts without considerable further information on just what happened here.

This also means the preliminary Q4 accounts released on January 17 should be treated as wild guesses.

From the BIS report:

One single bank makes up 61.7% of total, worldwide “cryptoasset prudential exposures” — that’s almost certainly Silvergate, with their bitcoin-secured loans to MicroStrategy and bitcoin miners.

And Silvergate is a VERY small institution.

This is why the crypto-bros libertarian wet dreams will never come to fruition.

In the absence of regulation, systemically important entities do stupid and dangerous things, and when they go over a cliff, so do a lot of other people.

If Alan Greenspan, who likely actually f$#@ed Ayn Rand, was forced to admit that regulation was essential to market function, it's essential to the proper function of markets.

No amount of trustless computer code enforced contracts will ever fix this.

Just shut it all down.