A number of major crypto-focused companies have severed ties with Silvergate Bank amid growing concerns about its continued operations.
Silvergate’s stock fell 57.72% on Thursday after the company delayed its annual report filing, saying its actual financial results could be materially different from those indicated in its forward-looking statements.
The firm cited the viability of its digital asset business as one of the reasons, which could be adversely affected by ongoing inquiries from regulators, including the U.S. Department of Justice.
In an announcement on Thursday, Coinbase said it would no longer accept or initiate payments to or from Silvergate as a cautionary measure.
Coinbase will be facilitating institutional client cash transactions with our other banking partners and have taken proactive action to help ensure that clients experience no impact from this change.
— Coinbase (@coinbase) March 2, 2023
Several other crypto companies followed suit, including blockchain infrastructure firm Paxos, stablecoin issuer Circle and Mike Novogratz’s crypto investment firm Galaxy.
1/ We maintain relationships with several banking partners. We are sensitive to the concerns around Silvergate and are in the process of unwinding certain services with them and notifying customers. Otherwise, all Circle services, including USDC are operating as normal.
— Circle (@circle) March 2, 2023
1/2 In light of recent developments, Galaxy has stopped accepting or initiating transfers to Silvergate. As a firm, we continue to have no material exposure to Silvergate, and this action was taken out of an abundance of caution.
— Galaxy (@galaxyhq) March 2, 2023
Crypto exchanges Bitstamp and Crypto.com (disclosure: sponsor of Unchained) issued similar actions shortly after, adding to the exodus of digital asset firms from Silvergate’s list of partners.
USDT issuer Tether and Winklevoss-run crypto exchange Gemini said they had no exposure to Silvergate. Gemini has also stopped accepting customer deposits and processing withdrawals through the bank.
Once regarded as a major on-ramp for crypto, Silvergate took a major hit after FTX’s collapse in November, when regulators raised questions about the bank’s hosting of accounts tied to Sam Bankman-Fried’s crypto empire.
“Silvergate’s death spiral is going to be rough for crypto. I don’t think retail investors realize how much market maker money moved around quickly via SEN, and how many crypto exchanges were/are banking with them,” noted Adam Cochran, partner at Cinneamhain Ventures.