• Silvergate Capital Corporation has halted its crypto payment services, called the Silvergate Exchange Network.
• This news comes after the bank recorded losses of $886 million and was ordered to release $9.9 million to a crypto lender.
• Cryptocurrency firms such as Coinbase Global Inc, Galaxy Digital Holdings Ltd, Paxos Trust, Bitstamp and Gemini have cut ties with the bank.
Silvergate Bank Cuts Crypto Payment Services
Silvergate Capital Corporation has made a risk-based decision to discontinue its crypto payment services called the Silvergate Exchange Network (SEN). The service enabled investors to facilitate 24/7 transfers to crypto exchanges and was heavily utilized for its fast transaction speed compared to traditional banking wire. With this announcement, all other deposit-related services remain operational.
Reactions from Industry Experts
J. Austin Campbell, an adjunct professor at Columbia Business School commented on this news as a bad sign: none of the money can leave as the company had to wait until after close of business to announce this. However, he expressed that many crypto firms cutting relationships with Silvergate is good news and makes it less catastrophic. KBW analyst Michael Perito also shared his sentiments stating that this is an interesting event for the crypto industry because SI was the highest regulated and most transparent counter-party in the institutional trading market.
Silvergates struggles began after recording losses of $1 billion in Q4 2022 followed by an additional loss of $886 million in Q1 2023 resulting in a 68 percent fall in its crypto-related deposits from $11.9 billion to $3.8 billion quarter on quarter. To repay its financial obligations, it recently sold additional debt securities while US bankruptcy court ordered it to release $9.9 million to BlockFi – a cryptocurrency lender – shortly before announcing operational issues which caused its stock price drop even further than before .
Overall, this move by Silvergate does not bode well for Bitcoin and other cryptocurrencies but due in part to other firms cutting ties with them may lessen some of the effects felt by those investing or using these currencies for transactions .