Crypto Industry Walks Away From Silvergate As Bank Crashes

Several crypto firms on Thursday issued statements intended to distance themselves from crypto-enabled bank Silvergate, which saw its shares tumble on Thursday after the company delayed its annual report and announced it would report further losses.

Coinbase, Paxos, Galaxy Digital, Gemini, BitStamp, and Circle each released statements saying they had severed ties with a once crucial partner linking them to the traditional banking system. MicroStrategy also responded to concerns about its Silvergate loan in the event the bank faces insolvency.

This estrangement from the crypto industry adds another business challenge for Silvergate, which announced late Wednesday that it will not meet the March 16 extension to file its annual report and questions its ability to continue trading in the over the next 12 months.

Shares of the company fell 56% in Thursday afternoon trading.

“Coinbase has de minimis corporate exposure at Silvergate,” the company said. Coinbase added that “out of an abundance of caution” it is no longer accepting or initiating payments to or from Silvergate.

New York-based crypto trust and stablecoin issuer Paxos has also announcement he was cutting ties with Silvergate. Paxos said it had halted transfers from its Silvergate account and had no material exposure to the bank. “We leverage a diverse network of banking partners,” Paxos said.

UK-headquartered Galaxy Digital, Bitstamp and also said in statements shared with Yahoo Finance that they were suspending banking with Silvergate “out of an abundance of caution” and that none of the companies were suffering any harm. material losses.

“If you choose to deposit funds into this account, you do so at your own risk,” Bitstamp added.

Gemini said he has “zero client funds and zero GUSD (stablecoin) with Silvergate” and he has stopped processing transactions through Silvergate.

“We have relationships with several banking partners. We are sensitive to the concerns around Silvergate and are in the process of untying some services with them and updating customers,” said stablecoin issuer, Circle. “Otherwise, all Circle services, including USDC, are operating normally,” Circle added.

MicroStrategy, the largest bitcoin holding company said its bitcoin loan with Silvergate, which is not due until Q1 2025, “would not accelerate” if Silvergate went bankrupt.

The Government of El Salvador’s Chivo portfolio also counts Silvergate as a key financial partner.

Slivergate CEO Alan Lane, second from right, is applauded as he rings the opening bell of the New York Stock Exchange before the start of his bank's IPO on Thursday, November 7 2019. (AP Photo/Richard Drew)

Slivergate CEO Alan Lane, second from right, is applauded as he rings the opening bell of the New York Stock Exchange before the start of his bank’s IPO on Thursday, November 7 2019. (AP Photo/Richard Drew)

In a filing with the SEC on Wednesday, Silvergate said recent changes have altered the timing and results of its annual report. Citing both financial and regulatory challenges, the company said it was assessing how these changes could affect its “ability to continue as a going concern for the twelve months following the publication of these financial statements.”

Silvergate said it also sold additional debt securities to repay interest on about $4.3 billion in loans taken from the Federal Home Loan Bank of San Francisco. He also cited ongoing regulatory investigations, private litigation and ongoing investigations by lawmakers as potential risks to the company going forward.

According to data analytics firm S3 Partners, an estimated 82% of Silvergate’s total float is sold short, making it the most shorted US stock by amount of float sold short. Silvergate shares have lost more than around 95% of their value over the past year.

Elsewhere, crypto exchange Kraken said it would limit transactions with Signature (SBNY), another US bank that caters to crypto businesses, as Bloomberg first reported on Wednesday. The move was attributed to Signature’s previous decision in early December to scale back its business with crypto-related businesses.

“Kraken maintains a number of different funding methods to ensure customers can still deposit and withdraw from their account. Consumers still have access to a range of payment methods through our other partners. Customers can contact the customer engagement team to determine what options are available to them,” a Kraken spokesperson said in a statement.

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