Silvergate Capital expresses doubts about its ability to say business. The holding company that provides financial services to crypto companies issued a warning about the ongoing activity.
Cryptocurrencies have been in the news and two cryptocurrency exchanges have dropped Silvergate as their banking partner. Bitcoin and Ethereum are down more than 3% in the last 24 hours.
Silvergate said it is in the process of re-evaluating its business and strategies in light of current business and regulatory challenges. As a result, the company is delaying its annual report with the Securities and Exchange Commission (SEC). The bank said it will not be able to meet the SEC’s extended March 16 deadline and is in the process of selling additional debt to pay the bills in 2023.
“The Registrant needs additional time to perform analysis, record journal entries related to subsequent events and complete its assessment of management’s internal controls over financial reporting,” Silvergate said in a regulatory filing.
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The crypto bank reported a $1 billion loss for the fourth quarter as investors rushed to withdraw deposits in the wake of FTX’s bankruptcy, suggesting the company’s problems underscore the fragility of trust in digital assets.
Silvergate sold additional debt securities in January and February 2023 and expects to post further losses.
“These additional losses will adversely affect the regulatory capital ratios of the company and its wholly-owned subsidiary, Silvergate Bank, and could result in the company and the bank being less well capitalized,” the filing said.
Silvergate, one of the most influential banks in the digital asset industry, has drawn the ire of lawmakers in the United States for its dealings with FTX and Alameda.
In January, a bipartisan group of US senators sent a letter to Silvergate, demanding details of the bank’s risk management practices and claiming that its due diligence procedures had “failed miserably”.
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Coinbase Global and Galaxy Digital on Thursday dropped Silvergate Capital Corp as their banking partner after the lender’s latest filing raised questions about its ability to stay in business.
Coinbase and Galaxy Digital also said they had little exposure to Silvergate, which has been mired in a banking crisis since the collapse of major crypto exchange FTX in November spooked investors.
Stablecoin issuers Paxos and Circle, Cboe digital asset exchange, Gemini crypto exchange and European crypto exchange Bitstamp have also suspended their partnerships with Silvergate.
JP Morgan downgraded its rating on Silvergate stock to “overweight” from “neutral” and withdrew its price target, saying the sale of additional securities suggests the company faces ongoing liquidity challenges.
“We now see an increased risk of further downside in SI shares given the outstanding risk that the bank is unable to remain a going concern,” JP Morgan analysts said in a research note.
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Reuters contributed to this report.
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