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Cryptocurrency bank Silvergate announced on March 3 that it was decommissioning its digital asset payments network, claiming that decommissioning was a “risk-based decision.” The move comes after the bank’s share price has fallen more than 59% over the past five days on fears of potential bankruptcy.
The disclaimer on Silvergate’s website states:
“Silvergate Bank has taken a risk-based decision to discontinue the Silvergate Exchange Network (SEN) with immediate effect. All other deposit-related services will continue to operate.”
A second ruling on the same day by U.S. Judge Michael B. Kaplan said Silvergate must return $9.85 million deposited by BlockFi.documented Listed on BlockFi’s Restructuring Advisor websitethe court ordered the bank to immediately release the funds after an agreement was reached between the two companies in November 2022.
BlockFi is one of the crypto companies affected by last year’s FTX collapse, along with Silvergate. Crypto banks had liquidity problems due to a crypto bear market, leading to net losses of $1 billion before suffering significant outflows in the fourth quarter of 2022.
To cushion the impact of the surge in withdrawals, Silvergate borrowed $3.6 billion from the Federal Home Loan Banking System (FHLB), a consortium of 11 local banks nationwide that provide funding to other banks and lenders. It is said that
and report Digital Asset Bank, issued by the U.S. Securities and Exchange Commission (SEC), highlights massive outflows of deposits and outlines steps taken to maintain cash liquidity, including wholesale funding and sales of debt securities Did. The crypto bank faces a class action lawsuit over its ties to FTX and Alameda Research.
Concerns that a liquidity crisis could lead to bankruptcy protection surged this week after Silvergate delayed filing its annual 10K financial report. Within 24 hours of the announcement, he announced that cryptocurrency companies Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos would scale back some of their partnerships with banks. MicroStrategy and Tether join a number of companies publicly denying any material exposure to banks.
According to Short Interest Reporting in February, Silvergate stock was the second most shorted stock in the United States, with more than 72.5% of shares sold short, Cointelegraph reported.
Silvergate did not immediately respond to Cointelegraph’s request for comment.
