Silvergate Bank has discontinued its cryptocurrency payment network. The decision to shut down the Silvergate Exchange Network followed the withdrawal of banking relationships by several major cryptocurrency firms, including Coinbase, Gemini, Paxos, and Circle.
Silvergate Discontinues Crypto Payment Network
Silvergate Bank announced on Friday that its cryptocurrency payment network, the Silvergate Exchange Network (SEN), has been terminated. According to a notice posted on the website of the cryptocurrency-focused bank:
Effective immediately, Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other services related to deposits remain operational.
SEN is Silvergate’s proprietary network that enables the bank’s institutional investors and digital currency clients to transfer US dollars between their Silvergate accounts and the accounts of other Silvergate clients 24 hours a day, seven days a week.
Concerns about Silvergate’s financial stability and future prospects rose following the collapse of crypto exchange FTX. The bank claimed that, as of September 20, 2022, FTX accounted for less than 10% of its total deposits of $11.9 billion from all digital asset customers. However, it is reported that the bank is being investigated by the US Department of Justice (DOJ) over accounts linked to disgraced FTX co-founder Sam Bankman-Fried (SBF).
On Wednesday, Silvergate informed the SEC that it is unable to file its annual report with the regulator for the fiscal year ending December 31 “within the prescribed time period without unreasonable effort or expense due to the reasons outlined below.” . The cryptocurrency-focused bank also disclosed that it sold additional debt securities at a loss this year, raising questions about the company’s ability to operate as a going concern. The filing further states that the bank’s continued losses could result in it being “less than well capitalized.” Silvergate added:
The company is currently in the process of reassessing its businesses and strategies in light of the business and regulatory challenges it currently faces.
After Silvergate raised concerns about its business, crypto-focused companies including Coinbase Global, Galaxy Digital, Paxos, Circle, Cboe digital asset exchange, Bitstamp and Gemini have suspended their banking partnership with Silvergate.
Shares of Silvergate (NYSE: SI) hit a new all-time low on Thursday, falling more than 97% from their November 2021 high. Last month, Silvergate became the most shorted stock in the US. The bank incurred a $1 billion loss in the fourth quarter of last year.
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