The digital asset business as a whole turned their backs on Silvergate. On Thursday, the SEC found out that the cryptocurrency-friendly bank had postponed submitting its yearly 10-K report. Coinbase, a cryptocurrency exchange, revealed that it had severed ties with Silvergate Bank, a US dollar financial partner, claiming an ongoing probe.
At Coinbase all client funds continue to be safe, accessible & available.
— Coinbase (@coinbase) March 2, 2023
In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.
The bank hinted in a notification to the SEC submitted yesterday that its financial health may vary from what had been previously revealed, as it had incurred more losses during its fourth fiscal quarter last year than it had reported in January. As a result, Silvergate’s equity price plummeted 53% on Thursday. From its all-time peak of about $222 in November 2021, during crypto’s earlier bull run, the price has dropped by more than 93%.
Bitstmap, a cryptocurrency exchange based in Luxembourg, announced in a blog post that it would temporarily suspend support for bank transfers conducted via Silvergate and instead use Signature Bank, another popular bank among firms within the digital assets industry, to facilitate U.S. dollar payments.
The owner and creator of the stablecoin USDC, Circle, announced that it was withdrawing from Silvergate as well. To its Twitter followers, Circle announced it was in the process of ending certain services with Silvergate and informing clients.
1/ We maintain relationships with several banking partners. We are sensitive to the concerns around Silvergate and are in the process of unwinding certain services with them and notifying customers. Otherwise, all Circle services, including USDC are operating as normal.
— Circle (@circle) March 2, 2023
Cboe Digital, a trading tool, and Galaxy Digital, a financial services company focused on cryptocurrencies founded by Mike Novogratz, have reportedly both ceased taking and starting payments to Silvergate.
1/2 In light of recent developments, Galaxy has stopped accepting or initiating transfers to Silvergate. As a firm, we continue to have no material exposure to Silvergate, and this action was taken out of an abundance of caution.
— Galaxy (@galaxyhq) March 2, 2023
Paxos, another company that issues stablecoins, which are digital assets whose prices are tied to fiat currencies like the U.S. dollar, said it had stopped transferring money to its account with Silvergate and would continue to process all outgoing payments.
Statement from Paxos on Silvergate Bank: Paxos does not have any material exposure to Silvergate. Paxos’ priority has always been the protection of its customers’ funds and assets, and as such we leverage a diverse network of banking partners.
— Paxos (@PaxosGlobal) March 2, 2023
Silvergate had said before that its bank deposits had dropped a lot because of the collapse of cryptocurrency exchange FTX. In January, Silvergate said that its bank deposits had dropped by 68%, or $8.1 billion, during the last fiscal quarter of 2022. The crypto-friendly bank got a $4.3 billion loan from the Federal Home Loan Bank and sold around $5.2 billion in debt securities to pay for the flood of withdrawals it was getting at the time.
Members of Congress, like Elizabeth Warren (D-Massachusetts), were upset with the bank. Warren wrote an open letter to Alan Lane, the CEO of Silvergate Bank, to tell him what she thought. The politicians said that Congress and the public needed to know what role Silvergate might have played in FTX’s collapse. The Department of Justice said last month that it was looking into the relationship between the bank and the now-defunct exchange that was started by disgraced crypto mogul Sam Bankman-Fried.
Silvergate is one of the most shorted stocks on the market right now because of the ongoing investigations and the ending of partnerships. By the end of January, more than 72% of Silvergate Capital stock had been sold short.
