- Silvergate reported losses of over a billion dollars in Q4/2022
- US Department of Justice is investigating their connections to FTX
California-based Silvergate had become a popular banking partner for many firms in the cryptocurrency market. However, its future seems far from bright now.
They reported losses of over a billion dollars in the fourth quarter of 2022 and warned that they could keep increasing. They also reduced their headcount by about 40% due to “the economic realities facing the digital asset industry today.”
Bank’s shares fell to an all-time low
Silvergate shares dropped from an all-time high of $220 each on November 19, 2021 to less than $8 per share last week. This development came after they announced the US Department of Justice was launching an investigation into their connections to failed crypto exchange FTX.
Coinbase, Crypto.com, Circle, and others dropped them as a banking and processing partner and JPMorgan downgraded the stock from “neutral” to “underweight.”
What is crypto banking’s future post-Silvergate? Does it have one? Bankless Times talks to two experts.
Nikolay Denisenko, Co-Founder and CTO of neo-digital banking app Brighty and ex-Revolut Lead Backend Engineer:
While there is no doubt that the market has been operating around two giants, Signature and Silvergate, I think many alternative market players will rise in the long run. The industry is learning from the same challenges it tries to solve, with an essential focus on centralization. While the future of Silvergate is blurry, current solutions are expensive and have pushed some innovative companies to fast-track their development of new customized offers for stakeholders in the Web3 world. In the long run, the ecosystem will be decentralized.
Przemyslaw Kral, CEO of digital currency exchange and trading platform Zonda:
Without these critical banking rails, we expect the industry will suffer from short-term issues such as increased trade slippage. However, with the extensive backing that the industry enjoys, we're sure it won't be long before the shoes of Silvergate are filled. Signature may be a viable alternative as it has a similar service to SEN in the form of Signet. Still, reports indicate the bank may already be distancing itself from crypto businesses. Unfortunately, any bank that does step up to the task will need to carefully weigh up the financial benefits and risks in an industry under increasingly intense regulatory scrutiny.
Contributors
