Silvergate bank is shutting its crypto exchange network
Press Release

Silvergate bank is shutting its crypto exchange network

written by John Murphy | March 7, 2023

Silvergate which is also widely known as the crypto bank insists the closing to be a risky decision as the bank is shutting its crypto exchange network services.

On March 3, crypto bank Silvergate declared that its digital assets’ payment network is going to be closed insisting it to be a “risk-based decision.” The bank’s stocks dropped 59% in the past five days which led to its decision of closing the payment network.

according to the statement from the website of Silvergate, the bank discontinued processing any sort of crypto payments. :

“Effective immediately Silvergate bank has made a risk-based decision to discontinue the Silvergate exchange network (SEN). All other deposit-related services remain operational.”

Previously, Blockfi had deposited $9.8 million dollars in Silvergate. A US judge Michael Kaplan made the decision that Silvergate has to return those funds. A restructuring advisor of Blockfi revealed on its website that the court ordered Silvergate to pay back those funds. This agreement was already done between the two companies in November 2022.

FTX collapse and its impact

FTX’s crumble in November 2022 led to the downfall of SIlvergate and also BlockFi. The liquidity issues of this crypto bank led to a $1 billion dollar loss. This issue took place because of the crypto bear market hit by distinct outflows at the end few months of 2022.

US Federal Home Loan Banks is a combined association of 11 regional banks across the US. They provide funding to other banks and lenders. According to the reports Silvergate borrowed $3.6 billion dollars from there.

A report was issued by the US Securities and Exchange Commission. It called attention to the heavy outflows of deposits and highlighted the steps to maintain cash liquidity which includes wholesale funding and selling debt securities. The bank’s association with FTX and Alameda Research faced lawsuits.

Silvergate delayed filing its annual 10k financial report after which the fears of undergoing a liquidity crisis were put to an end this week. When the announcement was made, crypto companies Coinbase, Circle, Bitstamp, Galaxy digital, and Paxos declared that they would step down from their association with the Bank. MicroStrategy and Tether joined other companies in publicly denying having any significant contact with the bank.

According to the reports, Silvergate stock was the most shorted stock in the US. In February, over 72.5% of its shares were shorted.