On Thursday, several crypto firms issued statements designed to distance themselves from crypto-friendly bank Silvergate, which saw shares fall Thursday after the company delayed its annual report and said it would report further losses.
Coinbase, Paxos, Galaxy Digital, Gemini, BitStamp, Crypto.com and Circle all issued statements saying they have cut ties with a once-critical partner that linked them to the traditional banking system. MicroStrategy has also expressed concern about its Silvergate loan in case the bank becomes insolvent.
This distancing from the crypto industry adds another business challenge for Silvergate, which announced late on Wednesday that it will not meet an extension on March 16 to file its annual report and casts doubt on its ability to continue through the next 12 months. to go.
Shares of the company fell as much as 56% during afternoon trading on Thursday.
Coinbase has minimal corporate exposure to Silvergate said. Coinbase added that “out of an abundance of caution” it is no longer accepting or initiating payments to or from Silvergate.
New York-based crypto trust and stablecoin issuer Paxos as well announced it cut ties with Silvergate. Paxos said it had stopped transfers from its Silvergate account and has no material exposure to the bank. “We use a diverse network of banking partners,” said Paxos.
Galaxy Digital, UK-based exchange Bitstamp and Crypto.com also said in statements shared with Yahoo Finance that they are halting banking transactions with Silvergate “out of an abundance of caution” and that none of the companies are incurring material losses.
“If you choose to fund this account, you do so at your own risk,” Bitstamp added.
Twin said it has “zero customer funds and zero GUSD [stablecoin] with Silvergate” and it has stopped processing transactions through Silvergate.
“We maintain relationships with several banking partners. We are sensitive to the concerns surrounding Silvergate and are in the process of completing certain services with them and notifying customers.” said stablecoin publisher, Circle. “Otherwise, all Circle services, including USDC, will operate normally,” Circle added.
MicroStrategy, the largest corporate holder of bitcoin said its bitcoin loan with Silvergate, which does not mature until the first quarter of 2025, “would not accelerate” if Silvergate went bankrupt.
The Government of El Salvador’s Chivo Wallet also considers Silvergate an important financial partner.
In a filing with the SEC on Wednesday, Silvergate said recent changes have changed the timing and results of its annual report. Citing both financial and regulatory challenges, the company said it is assessing the extent to which these changes could affect its “ability to continue its business during the 12 months following the publication of these financial statements”.
Silvergate said it also sold additional debt securities to pay back interest on about $4.3 billion in loans taken out from the Federal Home Loan Bank of San Francisco. It also cited ongoing regulatory investigations, private litigation and ongoing investigations from lawmakers as potential risks to the company going forward.
According to data analytics firm S3 Partners, it is estimated that 82% of Silvergate’s total float is sold short, making it the most shorted U.S. stock by amount of float sold short. Silvergate shares have lost more than 95% of their value in the past year.
Elsewhere, crypto exchange Kraken said it would restrict transactions with Signature (SBNY), another US bank that focuses on crypto businesses, as Bloomberg first reported on Wednesday. The move is attributed to Signature’s previous decision in early December to cut back on its business with crypto-related companies.
“Kraken maintains a number of different payment methods to ensure that customers can always deposit and withdraw funds from their account. Consumers will still have access to a range of payment methods through our other partners. Customers can contact the customer engagement team to determine which options are available. available to them,” a Kraken spokesperson shared in a statement.
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