Crypto.com, Coinbase, Paxos, Galaxy Digital, Gemini, BitStamp and Circle are some names of crypto companies that are distancing themselves from the Silvergate bank.
The reason is a precautionary move after the crypto-friendly bank’s stock plummeted 56% and may prove insolvent.
Silvergate: Crypto.com suspends USD withdrawals and deposits through bank
In recent days, Silvergate Capital Corporation, the parent company of Silvergate Bank, has been in the news for its delay in filing its annual 10-K report with the US Securities and Exchange Commission.
This delay is raising concerns in the crypto industry, not least because Silvergate’s stock has plummeted 56%, and it could be that the bank turns out to be insolvent.
That is why some crypto companies are taking steps precisely to distance themselves from Silvergate Bank, or at the very least, are trying to put precautionary actions in place.
The latest is Crypto.com, which just yesterday reportedly said it has suspended USD deposits and withdrawals through Silvergate.
JUST IN: Crypto․com suspends USD deposits and withdrawals via Silvergate.
— Watcher.Guru (@WatcherGuru) March 2, 2023
The crypto company reportedly commented on its decision in the following way:
“In light of recent news with regards to Silvergate and out of an abundance of caution, USD deposits and withdrawals via Silvergate have been temporarily suspended. Funds transferred via Silvergate will be rejected during this time.
Other deposit and withdrawal methods remain available and working as usual. All customer funds are safe and available. “We proactively communicated this change to current Silvergate users.”
Silvergate: in addition to Crypto.com, other crypto companies have also discontinued their cooperation with the bank
Crypto.com is just one of a list of crypto companies that have discontinued their cooperation with Silvergate Bank in the very last few days.
And indeed, Coinbase, Paxos, Galaxy Digital, Gemini, BitStamp, and Circle have issued statements saying they have cut ties with a crucial time partner that connected them to the traditional banking system.
In a roundup of tweets, Coinbase wanted to reassure its customers by emphasizing that their funds continue to be safe and accessible on the platform. This is because the company has minimal exposure to Silvergate and, despite this, has discontinued the partnership.
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.
— Coinbase 🛡️📞 (@coinbase) March 2, 2023
Even Paxos comments in much the same way as Coinbase, specifying that it uses a diverse network of banks.
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 (@Paxos) March 2, 2023
Gemini, the crypto-exchange affected by the Genesis collapse, specified that there are currently no funds of its clients at Silvergate bank.
1/ We are actively monitoring the situation with Silvergate Bank. We currently have zero customer funds and zero GUSD funds held at Silvergate.
— Gemini (@Gemini) March 2, 2023
The case of MicroStrategy and its loan to Silvergate Bank
While crypto companies are moving away from Silvergate Bank, there is someone who remains connected to it because of a loan.
That is MicroStrategy, Michael Saylor’s company, which is facing concerns about its loan to Silvergate in case the bank goes into default.
To that end, here is how the company comments on Twitter about its position:
We have a loan from Silvergate not due until Q1 ‘25. There are mkt concerns re SI’s fin. condition. For anyone wondering, the loan wouldn’t accelerate b/c of SI insolvency or bankruptcy. Our BTC collateral isn’t custodied w/ SI & we have no other financial relationship w/ SI.
— MicroStrategy (@MicroStrategy) March 2, 2023
The losses of the crypto-friendly bank
Silvergate (SI) stock opens today at $5.72, after trading at $13.53 last Wednesday.
On top of this collapse comes what has already been reported by the bank and that is a net loss of $1 billion and a drop in customer deposits of about $14 billion in the last quarter 2022.
These losses occurred around the collapse of the FTX crypto-exchange that shook the entire industry. Not only that, Silvergate was also hit with a class action lawsuit alleging that it directly aided FTX’s fraudulent activities in December.
In any case, Silvergate appears to be late with its annual filing with the SEC precisely because there may be other sales of more investment securities plus more debt securities (which occurred between January and February 2023), from which the bank expects to record further losses.