Silvergate Bank Terminates Crypto Payments Network as Shares Plunge to Record Low
Silvergate Bank has discontinued its cryptocurrency payments network. The decision to shut down Silvergate Exchange Network followed the withdrawal of banking relationships by several major cryptocurrency firms, including Coinbase, Gemini, Paxos, and Circle.
Silvergate Discontinues Crypto Payments Network
Silvergate Bank announced Friday that its cryptocurrency payments network, the Silvergate Exchange Network (SEN), has been terminated. According to a notice posted on the crypto-focused bank’s website:
Effective immediately Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational.
SEN is Silvergate’s proprietary network that allows the bank’s institutional investor and digital currency clients to transfer U.S. dollars between their Silvergate accounts and the accounts of other Silvergate clients 24 hours a day, seven days a week.
Concerns mounted over Silvergate’s financial stability and future prospects following the collapse of crypto exchange FTX. The bank claimed that as of Sept. 20, 2022, FTX represented less than 10% of its $11.9 billion total deposits from all digital asset customers. Nonetheless, the bank is reportedly being investigated by the U.S. Department of Justice (DOJ) over accounts tied to the disgraced FTX co-founder Sam Bankman-Fried (SBF).
On Wednesday, Silvergate informed the SEC that it is unable to file its annual report with the regulator for the fiscal year ended Dec. 31 “within the prescribed time period without unreasonable effort or expense due to the reasons described below.” The crypto-focused bank also revealed that it has sold additional debt securities at a loss this year, leading to questions about the company’s ability to operate as a going concern. The filing further states that the bank’s continued losses could result in it being “less than well capitalized.” Silvergate added:
The company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.
After Silvergate raised concerns about its business, crypto-focused firms including Coinbase Global, Galaxy Digital, Paxos, Circle, Cboe’s digital asset exchange, Bitstamp, and Gemini suspended their banking partnership with Silvergate.
Shares of Silvergate (NYSE: SI) hit a new all-time low on Thursday, plummeting over 97% from their peak in November 2021. Last month, Silvergate became the most shorted stock in the U.S. The bank incurred a loss of $1 billion in the fourth quarter of last year.
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