Silvergate Capital immediately stopped crypto payments on the Silver Exchange Network (SEN) after suffering a one billion dollar loss. Now the crypto bank is looking into the viability of the digital asset businesses.
Moreover, shares of Silvergate Capital had already shrunk by 29% last Thursday because the organization delayed publishing its annual report. The lender warned that the crypto bank is evaluating its ability to operate.
Silvergate stated on its website;
Effective immediately Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational
Brief Overview of Silvergate
The Exchange Network, popular with the bank’s customers, facilitated continuous transfers between investors and crypto exchanges. The bank works in contrast to conventional bank wire transfers, which may take several days to finalize.
Silvergate experienced a decline of over 2% last Friday, Although it closed up 0.9% at $5.77 in trading. The previous day, the bank’s shares hit a record low, a decrease of more than 97% compared to their peak in November 2021.
The crypto bank cautioned last Wednesday that it started evaluating its capability to continue operations as a going concern. The bank revealed that it had sold additional debt securities at a loss this year, and if it incurs further losses, it may become “less than well capitalized.”
The prominent exchanges stopped business with Silvergate
Coinbase Global Inc and Galaxy Digital, prominent players in the cryptocurrency market halted their banking relationship with Silvergate, after the cautionary statement. Additionally, stablecoin issuers Paxos and Circle, Cboe’s digital asset exchange, and crypto exchanges Bitstamp and Gemini suspended their partnerships with Silvergate.
The banking regulators provided multiple cautions to the financial institutions before the suspension of SEN. The regulator stressed looking into the potential hazards of being exposed to cryptocurrencies, particularly their volatility.
Related Reading | Silvergate Under Fire For Collaborating With Huobi Global Despite KYC Concerns
According to experts, exposure to cryptocurrencies comes with inherent risks. Unlike conventional investments, cryptocurrencies are decentralized and largely unregulated, and investors got exposed to market volatility and the possibility of fraud.
The lack of stability in established financial systems also affects cryptocurrencies, causing them to be vulnerable to sudden and significant price fluctuations. Furthermore, it can compromise the security of cryptocurrency exchanges and digital wallets, leading to the loss of assets.
The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing
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