By
Steve Muchoki
April 16th, 2024
Silvergate Bank noted that they have initiated action to maintain the cash liquidity including the selling of debt securities and wholesale funding.
Since the collapse of the crypto exchange FTX, crypto bank Silvergate Capital has come under major fire. As per the latest report, the Silvergate crypto bank has attributed $1 billion in a net loss to common shareholders during the Q4 of 2022.
The report published by the US Securities and Exchange Commission (SEC) highlighted that during Q4 2022, the digital asset bank witnessed a significant outflow of deposits. On the other hand, the bank also initiated action to maintain the cash liquidity including the selling of debt securities and wholesale funding.
Silvergate Bank said that in Q4 they have been hit by the ongoing crypto crisis. Besides, it also added that the current “transformational shift” in the crypto industry has led to a crisis of confidence across the ecosystem.
But despite facing severe headwinds, Silvergate CEO Alan Lane stated that the firm’s mission “has not changed”. He further added that the company shall stay focused on providing value-added services to its core institutional clients.
The report submitted by Silvergate Bank to the SEC notes that the digital asset customer deposits during the fourth quarter were $7.3 billion. This was significantly lower as compared to the $12 billion in deposits during the third quarter.
Silvergate Bank said that they are now preparing themselves for a sustained period of lower deposits. Besides, the bank is also managing its expense base and working on its product portfolio and customer relationships.
Silvergate CEO Alan Lane said that he continues to believe in the digital assets industry and will remain “committed to maintaining a highly liquid balance sheet with a strong capital position.”
Major Challenges for Silvergate Bank
With the collapse of the crypto exchange FTX, Silvergate Bank has faced major challenges. Last month in December 2022, Silvergate Bank faced a class action lawsuit over its previous involvement with now-bankrupt crypto exchange FTX and its sister trading firm Alameda Research.
Earlier this month in January, the crypto bank stated that it would be cutting its headcount roughly by 40% or 200 people in order to stay afloat and sail through a “more challenging macro environment”.
In addition to this, Silvergate Bank has also shelved its decision to launch a digital currency project while writing off the $200 million used to purchase the technology developed by Facebook.
Amid the current developments, Moody’s Investors Service has downgraded its rating of Silvergate Bank. They have reduced the rating from Baa2, which was “lower-medium grade, to now at Ba1, with the “junk” status.