Crypto services bank Silvergate announced that it's discontinuing its digital assets payment network, claiming the termination is a “risk-based decision.” The move comes after the bank's stock fell over 59% in the past five days due to fears of potential bankruptcy. Wells Fargo is rumored to be buying Silvergate, but there’s been no official word on that yet.
Silvergate was a major player in the centralized crypto game, servicing most of the major exchanges as their fiat on-/off-ramp provider. In 2020 and 2021, it was the go-to banking option for KYC’d crypto services. During that span, Silvergate’s stock grew 15x, but as deposits dried up in 2022, Silvergate got into trouble. Adding to that, FTX was one of Silvergate’s biggest customers, and Silvergate got swept up in the FTX collapse.
On Silvergate's website, they added a banner to the top with this disclaimer: “Effective immediately Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational.”
Silvergate's stock crashed this week on fears that the bank is insolvent and could seek bankruptcy protection. Silvergate’s stock has been going down for a while–it’s down ~95% since April 2022–but this week it took a big hit because the market was reacting to Silvergate's postponed filing of its annual 10K financial report. Apparently the market expects solvent banks to file their 10Ks on time.
Within 24 hours of Silvergate’s filing delay, Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos announced that they will scale back their partnerships with Silvergate. MicroStrategy and Tether also publicly denied exposure to the bank, in case you wondered what they were up to.
It’s never good news, when you’re in the CEX services business, to have this many centralized exchanges making public statements that they’re not going to be involved with your company anymore.