Silvergate in Trouble: Crypto Bank Cuts Staff by 40% Amid a 68% Decline in Crypto Deposits
Trouble is brewing for crypto bank Silvergate as the company cuts staff by 40% and sells assets at a loss to cover $8.1 billion worth of customer withdrawals. Furthermore, the company's crypto-related deposits saw a 68% decline in the fourth quarter of last year.
According to a Thursday report by Wall Street Journal, the dramatic collapse of FTX sparked a run on Silvergate, forcing the bank to sell assets at a steep discount in a bid to cover around $8.1 billion in user withdrawals.
The crypto bank liquidated $5.2 billion of debt securities it was holding on its balance sheet in a bid to meet user withdrawals. Consequently, it incurred a $718 million loss, which reportedly exceeds the bank’s total profits since at least 2013 by far.
Furthermore, Silvergate saw a 68% decrease in its crypto-related deposits in the fourth quarter of the year, the bank allegedly said in an early release of some quarterly results. Total deposits from digital asset customers declined to $3.8 billion at the end of 2022, compared with $11.9 billion on September 30, 2022.
Despite this, the bank remains positive in its commitment to crypto and reportedly has the funding to handle a “sustained period of transformation.”
The bank has also laid off 40% of its staff, which equals about 200 employees. Apart from this, the bank has dropped plans to launch its own digital currency, writing off the $196 million it spent buying the technology that Facebook had built in its failed attempt to start a crypto-based payments network.
Silvergate describes itself as a "leading bank for innovative businesses in fintech and cryptocurrency." However, its main business appears to have been facilitating payments between crypto hedge funds like Alameda and crypto
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