Silvergate Bank Terminates Crypto Payment Network As Shares Plummet

Silvergate Bank Terminates Crypto Payment Network As Shares Plummet

Silvergate Bank has decided to terminate its cryptocurrency payment network. The decision to shut down Silvergate Exchange Network followed the withdrawal of banking relationships by several major cryptocurrency firms, including Coinbase, Gemini, Paxos, and Circle.

Silvergate Exchange Network (SEN) is Now Discontinued

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 official website of the crypto-focused bank:

"Effective immediately, Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational."

SEN is Silvergate’s proprietary network that allows the institutional investors of the banks and their 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.

Speculations have been rife over Silvergate’s financial stability and prospects following the collapse of the crypto exchange FTX. The bank claimed that as of September 20, 2022, FTX represented less than 10% of its total USD 11.9 billion in deposits from all digital asset customers. However, the bank is reportedly being investigated by the US Department of Justice (DOJ) over accounts tied to the disgraced FTX co-founder Sam Bankman-Fried (SBF).

Shares Plummet to Record Low

Silvergate informed the SEC on Wednesday that it is unable to file its annual report with the regulator for the fiscal year ended December 31 "within the prescribed deadline without unreasonable effort or expense due to the reasons described below." The crypto-focused bank also revealed that it has sold additional debt securities at a loss this year, leading to questions about the ability of the company to keep operating. The filing further states that the continued losses of the bank could result in it being "less than well capitalized." Silvergate further added:

"The company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces."

Crypto-focused firms including Coinbase Global, Galaxy Digital, Paxos, Circle, Cboe’s digital asset exchange, Bitstamp, and Gemini suspended their banking partnership with Silvergate after the bank raised apprehensions about its business.

Shares of Silvergate (NYSE: SI) hit a new all-time low on Thursday, plummeting over 97% from their peak in November 2021. Last month, Silvergate became the most shorted stock in the US. The bank incurred a loss of USD 1 billion in the last quarter of 2022.

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