Coinbase announced that it was suspending all associations with silvergatebank, on the contrary opting for a partnership with a rival bank.
The movement comes that the crypto-bank has faced delays in filing its 10K with the Securities and Trade Commission and a degradation by jpmorgan.
Coinbase Suspends Ties With Silvergate Bank
Cryptocurrency exchange COINBASE has announced that the exchange will no longer accept or initiate payments from or to Silvergate Bank. The announcement, coming March 2, 2023, comes as the bank has delayed the deposit of its 10-k annual with the securities and foreign exchange commission (sec). Silvergate said it took longer to finish the depot with the dry. After that time, JPMorgan demoted bank shares from "neutral" to "underweight."
Movement through Coinbase should happen as no surprise after it emerged that Silvergate Bank disclosed in a filing with the Securities and Exchange Commission that it may have “less than well-capitalized assets and that it was “reevaluating its business.” The bank also said it could face requests for information from regulatory agencies and the Department of Justice, and its capacity to remain "an ongoing concern" could be affected in the coming year.
Silvergate shares were already down in value when the coins announced their intent to cut the ties. Coinbase stated,
“At Coinbase, all client funds continue to be safe, accessible, and available. Based on recent developments and as a precautionary measure, Coinbase no longer accepts payments to or from Silvergate."
The exchange emphasized that all money held with him is safe.
Pressure Building On Silvergate
Against the backdrop of its filing on Wednesday, pressure is growing on Silvergate, as it also stated that it would have to repay Federal Home Loan Bank loans it had taken out last year. The bank stated in its filing,
“Subsequent to the 31st of December, 2022, a number of circumstances have occurred which will negatively impact the timing and the unaudited results previously reported in the Earnings Release, including the sale of additional investment securities beyond what was previously anticipated and disclosed in the Earnings Release primarily to repay in full the Company’s outstanding advances from the Federal Home Loan Bank of San Francisco.”
Coinbase's announcement and downgrade JPMorgan comes that reports have also emerged that crypto-based derivatives platform Ledgerx has already informed customers that it does not work with Silvergate. According to the so-called ledgerx email, all subsequent wires will now be processed through the bank of record. Ledgerx was part of the ftx group of companies and is one of the subsidiaries involved in the bankruptcy proceedings against the stock market.
Silvergate’s downward spiral began with the collapse of FTX, following which the United States Department of Justice announced an investigation into the bank’s role in the FTX collapse. With the ongoing investigation and the collapse of several partnerships, Silvergate is among the most shorted stocks in the market. Based on data from the financial sector regulator, short positions accounted for more than 72 per cent of Silvergate's equity capital.
Others Firms Also Quit Silvergate
Several other companies in the crypto ecosystem have also announced that they would be suspending associations with Silvergate. They include the aforementioned currency base, as well as paxos, circle, crypto.com, bitstamp, galaxy digital, cboe digital markets, and gemini. All businesses have announced that they will suspend automatic transfers (ach) and other transactions related to the bank. So far, Kraken appears to be the only major actor still using silvergate.