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Cryptocurrency Bank Silvergate Shuts Down Its Digital Asset Payment Network

cryptocurrency bank silvergate shuts down its digital asset payment network

Silvergate Bank announced today that it would be discontinuing its digital asset payment network, a decision stemming from risk management. Just five days ago, the stock’s value plummeted by more than 59%, as investors worried about potential bankruptcy proceedings.

Needs to Pay Its Debts Immediately

On the Silvergate website, Judge Michael Kaplan recently announced that due to risk factors, Silvergate Bank has decided to discontinue its Silvergate Exchange Network (SEN). All other deposit services remain in full operation. In accordance with a November 2022 agreement between Blockfi and Silvergate Bank, the court then ordered an immediate return of $9.8 million deposited by BlockFi – as noted on documents posted online from their restructuring advisors.

Silvergate has announced a net loss of $1 billion in the fourth quarter of 2022 as deposit withdrawals surged in the wake of the bear market.

To shield their business against an unexpected spike in withdrawals, Silvergate reportedly procured a loan of $3.6 billion from the Federal Home Loan Banking System -an alliance comprising eleven regional banks across America which provides financial support to other lenders and banking entities.

The U.S. Securities and Exchange Commission (SEC) recently released a report in which Silvergate disclosed their high volume of deposit withdrawals and the steps they are taking to preserve cash liquidity, such as raising wholesale funding and selling debt securities. In addition, Silvergate is currently being faced with a class action lawsuit pertaining to its relationship with FTX and Alameda Research.

cryptocurrency bank silvergate shuts down its digital asset payment network

Other Major Exchanges Are Also Wary of Silvergate

Silvergate’s delay in submitting its yearly financial report has caused anxiety that a liquidity crisis could force the company to file for bankruptcy. In response, Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos all announced within 24 hours of this postponement that they would be severing their ties with Silvergate.

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