Alan Lane, the former CEO of Silvergate Bank, says the crypto-focused lender survived withdrawals of about 70% of its demand deposits before political pressure pushed it toward liquidation. In a Sept. 8 account, Lane blamed the Biden administration for making continued operations untenable. He said Silvergate remained solvent and liquid after the late-2022 run and could have kept serving customers. The bank announced its voluntary wind-down on March 8, 2023.
The Federal Reserve’s inspector general gave a different explanation in September 2023. It pointed to concentration in crypto-industry depositors, rapid growth, funding risks, and weaknesses in governance and risk management. The Fed confirmed in July 2024 that Silvergate had completed liquidation and repaid all customer deposits. The Fed separately fined Silvergate $43 million for anti-money-laundering noncompliance.
Why trust charters are different
Silvergate was already supervised by the Fed and its San Francisco Reserve Bank. The newer firms are choosing a different model and a different federal supervisor. The Office of the Comptroller of the Currency conditionally approved trust-bank applications for Ripple and Circle’s proposed First National Digital Currency Bank, plus conversions for BitGo, Fidelity Digital Assets, and Paxos. Circle announced final approval on July 10 for Circle National Trust. Coinbase received preliminary conditional approval on April 2 for fiduciary digital asset custody.
A federal trust charter gives crypto companies a recognized legal path for custody. It also creates a direct supervisory relationship with Washington. That can be useful, but it is not simple protection. Coinbase’s proposed trust bank would not be an insured depository institution. Fiat held in custody would sit in for-benefit-of accounts at third-party banks. So the company would still depend on other banks for cash.
Rules can change
The OCC imposed a written non-objection process for specified crypto activities in November 2021. Banks had to check with supervisors before proceeding. The agency rescinded that process on March 7, 2025, and withdrew from two 2023 interagency crypto-risk statements. That changed the route into crypto activity, but it did not remove examinations or duties to operate safely and follow the law.
New limits also constrain supervisors. An OCC and FDIC reputation-risk rule effective June 9 bars the agencies from taking adverse supervisory action based on reputation risk. It also bars pressure on institutions to cut off customers solely because they engage in lawful but politically disfavored activity. On Aug. 27, the agencies announced standards for unsafe or unsound practices and matters requiring attention. The final rule was published Sept. 1 and takes effect Nov. 2. It focuses on material financial harm or deposit-insurance risk and excludes reputational concerns unrelated to financial condition.
Those protections do not eliminate regulatory authority over custody, compliance, and financial resilience. Future leadership could still impose tighter conditions. For crypto firms, the test is whether a federal charter offers predictable rules while they still need banking partners. It can give more control over custody. It also ties them more directly to Washington.
