Heavy hitters in the cryptocurrency industry like Coinbase and Galaxy Digital ditched Silvergate Capital Corp as its banking partner on Thursday. This followed apparently after the lender’s most recent filing which cast doubt on its capacity to continue operating.
Thus, Coinbase and Galaxy Digital both claimed to have little exposure to Silvergate. The bank has been caught up in a bank run problem following the bankruptcy of the important cryptocurrency exchange FTX in November. In fact, this alarmed investors.
Silvergate, one of the most significant banks in the digital asset sector, has headquarters in La Jolla, California, and has come under fire from American lawmakers for its interactions with FTX and Alameda.
Moreover, bipartisan U.S. senators wrote to Silvergate in January demanding information about the bank’s risk management procedures and claiming that its due diligence procedures “failed horribly.”
Since Silvergate is a big participant in the industry, this is not good news for the entire cryptocurrency market, according to Marcus Sotiriou, analyst at digital asset broker GlobalBlock.
“The outcome is still unclear, but we might potentially see some harmful effects spread from cryptocurrency firms using Silvergate Bank,” Sotiriou continued.
Furthermore, Silvergate’s partnerships with stablecoin issuers Paxos and Circle, Cboe’s digital asset exchange, and European cryptocurrency exchange Bitstamp have all come to an end.
In addition, formerly one of Silvergate’s top clients, Coinbase said that it will work with Signature Bank and other financial institutions to make it easier for institutional clients who have parked funds with the exchange to conduct cash transactions.
Following the revelation, Silvergate’s shares fell to a record low of $6.80, wiping out more than $200 million of its market capitalisation.
However, in a statement released on Wednesday, Silvergate stated that it had postponed the release of its annual report. Also, the bank was assessing how these developments might affect “its capacity to continue as a going concern.”
