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Silvergate Capital Corp: The Risk of Non-Performing Liabilities

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On March 6, according to the Washington Post, if Silvergate Capital Corp. fails, it may become the first bank to fail due to non-performing liabilities rather …

Silvergate Capital Corp: The Risk of Non-Performing Liabilities

On March 6, according to the Washington Post, if Silvergate Capital Corp. fails, it may become the first bank to fail due to non-performing liabilities rather than non-performing assets, because its bad debts are deposits rather than assets. The deposit of Silvergate is not a deposit in the normal sense. Its characteristics are more like the floating cash held by remittance companies such as MoneyGram International or Western Union. The only reason Silvergate attracts cash is to settle the transaction of entering and leaving a specific group of assets. However, the deposit movement speed of Silvergate may be much slower than the floating speed of this cash, as long as the market’s interest in cryptocurrency decreases, The depositors will begin to disappear.

Washington Post: Silvergate’s bad debts are deposits rather than assets

Analysis based on this information:


The statement mentions that Silvergate Capital Corp. is at risk of becoming the first bank to fail due to non-performing liabilities. This is an alarming problem that could lead to a significant financial crisis. Unlike traditional banks, Silvergate’s deposits are not normal deposits. It is more like the floating cash held by money transfer firms such as MoneyGram International and Western Union. This means that Silvergate’s deposit movement speed may be much slower than the floating speed of cash circulating in the market.

The danger for Silvergate lies in the fact that its bad debts are not assets, but deposits. If its depositors begin to disappear because of the falling interest in cryptocurrencies, Silvergate may not have enough liquidity to meet its obligations. This creates a ripple effect in the market, leading to panic and uncertainty among investors.

One of the reasons why Silvergate attracts cash is to settle transactions of a specific group of assets. This makes it unique among other banks, which primarily focus on loans and investments. The rise of cryptocurrencies has led to many banks, including Silvergate, embracing blockchain technology as an alternative to traditional banking methods. However, this comes with its risks, and the market’s interest in cryptocurrencies can be volatile.

In conclusion, the risk of non-performing liabilities is a growing concern for banks, especially those that operate outside the traditional banking model. With the rise of cryptocurrency and blockchain technology, it is more critical than ever for banks such as Silvergate to keep an eye on the market and take preventive measures to mitigate risk. While Silvergate may have unique characteristics, it still operates in a demanding and increasingly competitive market where market risk is a fact of life.

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