The alleged financial problems of Silvergate Bank provoked a wave of rejections of the bank’s services from U.S. cryptocurrency companies. LedgerX, Coinbase, Gemini, Crypto.com, Bitstamp, and others cut ties with the bank. Against this backdrop, shares of parent company Silvergate Capital (SI) fell by nearly 60%.
Crypto-friendly bank Silvergate seems to be experiencing some liquidity problems. Such rumors began circulating after bank representatives asked the SEC for a two-week delay before filing a report on the company’s financial condition.
Bank officials explained the need to postpone the filing by increasing debt repayment transactions to creditors, acknowledging the possibility of growing losses. According to their statement, this could undermine the company’s financial position, and there were concerns about the bank’s ability “to continue as a going concern.”
The rumors about the company’s financial problems primarily affected the stock price of its parent company, Silvergate Capital (SI). TradingView noted that the company’s shares fell by over 57%, crushing the bank’s market cap to $428.3 million.
Amid the news of Silvergate Bank’s possible bankruptcy, American offices of various cryptocurrency companies began declaring their end of cooperation with the bank. Thus, Silvergate Bank’s services were abandoned by:
- LedgerX. The crypto platform refused to use Silvergate for internal bank transfers, switching to Signature Bank’s service.
- Coinbase. The crypto exchange no longer accepts or initiates payments through Silvergate.
- Galaxy Digital. The FinTech company terminates its partnership with Silvergate “out of an abundance of caution.”
- Paxos. The cryptocurrency company stopped all transfers through the Silvergate Exchange Network but will continue to process outgoing payments.
- Bitstamp. “As a precautionary measure,” the crypto exchange no longer processes transfers through Silvergate, initiating transfers by “other global banking partners.”
Other members of the U.S. cryptocurrency market follow developments surrounding Silvergate Bank, notifying customers that they have no ties with the bank:
- Gemini. Representatives of the exchange said the company didn’t hold customer funds or GUSD funds at Silvergate.
- Tether. Paolo Ardoino, CTO of the USDT stablecoin issuer, said the company didn’t “have any exposure to Silvergate.”
- Circle. Representatives for USDC’s issuer didn’t confirm their connection to Silvergate, saying that they would “notify customers.”
Notably, crypto companies’ worries about the future of Silvergate Bank are also linked to the investigation by the U.S. Department of Justice. Bloomberg reports that the DOJ’s Fraud Section is looking into Silvergate Capital’s dealings with the bankrupt exchange FTX and its affiliate Alameda Research. While prosecutors haven’t filed any formal charges against Silvergate, the crypto community is still wary of the implications of the criminal investigation and its impact on the bank’s partners.
The hype around Silvergate also negatively affected cryptocurrency quotes. Thus, according to CoinGecko, BTC fell by 6.5% over the past week, while ETH is down by 5%. As of March 3, 11:00 am (GMT+2), Bitcoin is trading at $22,390 and Ethereum at $1,570.
The crypto market has shown steady growth since the beginning of 2023. In 2023, the value of the first cryptocurrency exceeded $24,000, while the total cap of the cryptocurrency market grew by about 25%.
