Silvergate was no longer in great shape after a series of partners confirmed breakups, driving shares down sharply. Is it the end game for the crypto-friendly bank?
Coinbase announced on Thursday that it would no longer support deposits and withdrawals via Silvergate. The exchange said it switched to Signature Bank (SBNY) due to “abundance of caution” from Silvergate.
“At Coinbase all client funds continue to be safe, accessible & available. In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.”
Running Away From Silvergate
Bitstamp and Paxos announced on the same day that it suspended all SEN transfers and wires from Silvergate to protect customers’ funds and assets. Galaxy Digital also said it ended its relationship with Silvergate, terminating all transfers with the bank.
Earlier today, Crypto.com notified on its official website that it would temporarily suspend US transfers via Silvergate Exchange Network (SEN).
Silvergate has recently got entangled in discredit after the bank said that it had to delay the annual report for the fiscal year 2022. The reason for this delay was the process of revaluation and the discovery of several new losses related to its securities portfolio.
The bank also cautioned investors that it might not be able to survive the next twelve months.
You might speculate when rumors claim your bank is in trouble, but when the bank says it, you know trouble is on the road. And that was where the red flag triggered other companies.
Silvergate’s stock plummeted following the breakup of Coinbase and Silvergate, among others’. After the market opened, Silvergate shares fell over 80%, hitting an all-time low.
Following negative news from Silvergate, the crypto market has been covered in red. Bitcoin fell sharply to around $21,000, then rebounded to $22,3000. Ethereum lost 6% of its value in the last 24 hours. The coin is currently trading at $1,500.
The list of companies goes on and on. Circle, MicroStrategy, Kraken, and Ledger X were the latest giants that jumped ship from Silvergate.
The beauty story between Silvergate and crypto firms comes to an abrupt end following the bank’s financial struggles and tightening regulatory oversight.
Silvergate was renowned as a crypto-friendly bank when it used to provide banking solutions to crypto firms via the SEN network, including Coinbase, Kraken, Bitstamp, Circle (USDC), and Paxos (BUSD, USDP).
With the demise of FTX, the US Department of Justice (DoJ) launched an investigation into Silvergate Bank’s interactions with FTX and Alameda Research.
By the time FTX submitted its bankruptcy petition in November 2022, Silvergate had lost touch with the company.
Despite this, it continued to face challenges due to the widespread withdrawal of consumers. In order to deal with the situation, the bank had no choice but to liquidate its assets and lay off 40% of its workforce.
Silvergate this week missed its SEC filing deadline, raising concerns about the bank’s outlook as it is known to have been hit hard by the previous crashes.
Silvergate, from a deposit gateway for major crypto companies, is now the fear of the cryptocurrency. Silvergate’s potential shutdown is a threat to many large companies.
News stories that Silvergate may be closing down have the crypto community concerned about the liquidity shortage domino effect that has previously occurred in the market.
The bank is said to be in contact with numerous major large companies in the sector, including Coinbase, Kraken, Circle, and Gemini, among others.
Silvergate and Binance had partnered in the past.
Nevertheless, in June 2021, Binance announced the termination of its relationship with Silvergate, halting all deposits and withdrawals through the bank. Both parties remained silent at the moment.
Perhaps CZ saw what was going to happen.