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Key Takeaways:
- According to the company, Silvergate’s Silvergate Exchange Network will close as part of a risk-based decision.
- The closure of Silvergate Exchange Network won’t have an impact on other deposit-related services, according to Silvergate.
Two days after a digital asset-focused bank expressed concerns about the viability of its cryptocurrency payments network, Silvergate Capital Corp. said on Friday that it had taken a “risk-based decision” to stop operating the Silvergate Exchange Network (SEN).
The SEN platform, used by organizations to transfer funds to cryptocurrency exchanges, was terminated by Silvergate Bank after it issued a warning this week about its ability to continue operating. The business announced Friday 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,”
Contrary to traditional bank wires, which frequently take days to clear, the Silvergate Exchange Network—one of the bank’s most well-liked offerings—enabled 24-hour transfers between investors and cryptocurrency exchanges.
The bank’s clients can perform transactions with one another at any time, including on the weekends and after hours, using the SEN instant settlement service, which is available around the clock. Major cryptocurrency companies such as Binance US, Kraken, Gemini, and ErisX were among the bank’s customers for the service.
After ending Friday’s regular trading up 0.9% at $5.77, Silvergate shares fell more than 2% in after-hours trading. On Thursday, the stock had reached a record low and was down significantly from its all-time high in November 2021 at the close of the day.
After announcing on Wednesday that it would postpone submitting its yearly report due to inquiries from its auditors, Silvergate has had a tough week. In the same notice, the bank admitted that the US Department of Justice and bank authorities were looking into the matter and that it might not be able to continue as a “going concern” shortly.
Heavyweights in the cryptocurrency industry, like Coinbase Global Inc. and Galaxy Digital, dropped Silvergate as a banking partner after the alert. Silvergate’s agreements with stablecoin issuers Paxos and Circle, Cboe’s digital asset exchange, and cryptocurrency exchanges Bitstamp and Gemini have all been terminated.
Recently, the bank agreed to transfer $9.85 million to struggling cryptocurrency lender BlockFi in accordance with the terms and conditions outlined in BlockFi’s bankruptcy. According to its SEC filing, Silvergate is currently dealing with several problems, such as litigation, governmental oversight, and congressional scrutiny.
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