Silvergate, a bank focused on digital assets, has laid off 40% of its workforce. Meanwhile, the company had to sell assets to stabilize its balance sheet, resulting in a $718 million loss.
A traditional bank focused on cryptocurrencies
Another big storm is coming for the crypto industry: the name of Silvergate is on everyone’s lips.
Silvergate, a well-known institution specializing in digital assets, announced on January 4 that it had laid off 200 people, or 40% of its total workforce. The announcement comes ahead of the release of data for the final quarter of 2022. The company has already released several important figures.
Shares of the bank fell 42% on the New York Stock Exchange stock market as of Thursday’s close. An event that did not go unnoticed because Silvergate Bank is listed in New York and therefore at the center of the American stock exchange.
Furthermore, while Silvergate is not a cryptocurrency exchange, it is a bank, a lender related to cryptocurrencies and more specifically to FTX.
So Silvergate is a real bank, headquartered in San Diego, which means it’s a link in the American financial system.
So let’s face it, this is a very crypto focused bank, and at this point we are nowhere near the significant systemic risk that has been on the minds of US regulators for some time, but still.
A 68% reduction in customer deposits
To make the layoffs, the company spent $8 million, much of it on severance and other benefits.
As regards customer deposits, while as at 30 September they amounted to 11.9 billion dollars, the same indicator fell sharply three months later and now stands at 3.8 billion dollars. This therefore equates to a 68% reduction.
It should also be noted that a portion of those deposits, $150 million, came from clients who are now bankrupt.
Additionally, Silvergate was forced to sell at a loss to maintain a healthy balance sheet. These sales represented $5.2 billion in assets and resulted in a loss of $718 million for the company in the fourth quarter of 2022.
“In response to the rapid changes in the digital asset industry during the fourth quarter, we have taken adequate measures to ensure we maintain liquidity to address potential deposit outflows and currently maintain a liquidity position in excess of our digital asset related deposits. summarizes Alan Lane, CEO of the company.
This would appear to be another catastrophe for the cryptocurrency industry, and this time in terms of ecosystem funding. The next meeting will be held on January 17, when the bank’s full quarterly results report will be released.
The end of the Diem project?
In early 2022, Meta sold Diem’s assets to Silvergate after encountering multiple difficulties building its stablecoin project.
Today, Silvergate has shelved its ambitions to build a blockchain-based payment system and has seen $196 million in the value of affected assets soar.
Despite the negative headlines, Silvergate still has $4.6 billion in cash. Now is not the time for a liquidity crisis, which should also reassure investors. Although the company had to communicate a few months ago on BlockFi.
Blockfi went bankrupt after the FTX crash and Silvergate suffered $20 million in losses as a result.