Silvergate’s financial woes have caused a multitude of cryptocurrency companies to halt transfers with the crypto bank, while others have scaled back their relationship.
The FinTech firm provides financial infrastructure solutions and services to some of the largest cryptocurrency exchanges, institutional investors and mining companies in the world. Its Silvergate Exchange Network has processed more than $1 trillion in transactions since 2017 while it also provides a stablecoin infrastructure platform.
The company lost $1 billion in the fourth quarter of 2022 alone, while additional loan repayment obligations mean it may soon be “less than well-capitalised”, in its own words. The bank has delayed a Securities and Exchange Commission filing after it made last-minute asset sales to repay an outstanding balance on a federal loan.
It is also reportedly facing an investigation from the United States Department of Justice over its alleged role in the collapse of exchange FTX. Former FTX CEO Sam Bankman-Fried, charged with wire and securities fraud as well as money laundering, held an account at Silvergate.
Companies to terminate partnerships with Silvergate include Coinbase, Bitstamp, Gemini, Galaxy Digital, Crypto.com, Paxos, Tether and USDC issuer Circle.
Analysts at JPMorgan wrote: “With the company having sold additional securities (beyond what was guided) as a loss in January/February, this reflects that the company is facing continued liquidity challenges.”
Silvergate shares lost more than half their value on Thursday, ending the day at $5.75 – down from $13.53 at the Wednesday close.
There was also a drastic drop in the price of Bitcoin on Thursday following the news. At the time of writing (7am UK), the overall crypto market had fallen 4% in the previous 24 hours.