Friday, January 6, 2023

Crypto-Focused Bank Silvergate Slashes 40% Workforce, Abandons Several Projects

CEO Alan Lane said that Silvergate currently maintains a cash position in excess of its digital asset-related deposits.

The FTX collapse has accelerated lay-offs as the sector struggles to weather the incessant turmoil.

Crypto-focused bank – Silvergate Capital – has become the latest to slash 40% of its workforce, which is around 200 employees, according to a Wall Street Journal report on Thursday.

The news comes as the bank experienced massive customer withdrawals. In a statement, Silvergate said,

“As we enter a new year and continue to navigate the current environment, we are focusing our strategy to provide the most value-added solutions for our core digital asset customers.”

In an early release of a part of Silvergate’s fourth quarterly results, the bank said that crypto-related deposits fell by a major 68% from $11.9 billion to $3.8 billion.

By the end of 2022, $150 million of Silvergae’s deposits were held by customers who had filed for bankruptcy protection.

There was a cash crunch during this period. As a result, it resorted to liquidating the debt it was holding on its balance sheet to satisfy withdrawals. In the process, the company lost $718 million, which far exceeded its total profits since 2013.

The California-based company is also planning to scrap the launch of its own digital currency project, writing off the $196 million that it paid social media giant Facebook to purchase the tech it built for the Diem project.

Following the business update, Silvergate stock plunged by over 47% in premarket trading.

FTX’s bankruptcy sent Silvergate on a bank run which forced the platform to sell assets at a significant loss to cover some $8.1 billion in withdrawals.

Dented investor confidence meant a steep decline in deposits. But Silvergate could operate around such turbulent times because it is structured very differently from most banks.

Despite the downturn, the bank assured its customers that it has sufficient funding to handle a “sustained period of transformation.”

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