The crypto industry distances itself from Silvergate when the banks collapse

On Thursday, several crypto firms issued statements intended to distance themselves from crypto-friendly bank Silvergate, which saw its shares plummet Thursday after the company delayed its annual report and said it would report further losses.

Coinbase, Paxos, Galaxy Digital, Gemini, BitStamp, and Circle each released statements saying they have cut ties with a once-crucial partner linking them to the traditional banking system.

That distance from the crypto industry presents another business challenge for Silvergate, which said late Wednesday it will not meet a March 16 extension to file its annual report and cast doubt on its ability to continue as a going concern over the next 12 the months.

Shares in the company fell as much as 56% in afternoon trading on Thursday.

“Coinbase has de minimis corporate exposure to Silvergate,” the company so. Coinbase added that “out of an abundance of caution” it is no longer accepting or initiating payments to or from Silvergate.

New York-based crypto trust and stablecoin issuer Paxos as well announced it was to cut ties with Silvergate. Paxos said it had suspended transfers from its Silvergate account and has no material exposure to the bank. “We leverage a diverse network of banking partners,” Paxos said.

Galaxy Digital is also stopping banking transactions with Silvergate “out of an abundance of caution”. It added in a statement shared with Yahoo Finance that the company also has no material exposure and is committed to helping clients navigate the “ever-changing” crypto market.

The twins so it has “zero customer funds and zero GUSD (stablecoin) with Silvergate” and it has stopped processing transactions through Silvergate.

UK-headquartered Bitstamp said it was no longer working with Silvergate, but said customers using the bank to transfer funds to an account on its platform could still experience losses.

“If you choose to deposit money into this account, you do so at your own risk,” Bitstamp said. said it is also stopping USD deposits and withdrawals with Silvergate, but “other deposit and withdrawal methods remain available and work as usual.”

“We maintain relationships with several banking partners. We are sensitive to the concerns surrounding Silvergate and are in the process of discontinuing certain services with them and notifying customers.” so stablecoin issuer, Circle. “Otherwise, all Circle services including USDC are operating as normal,” it added.

The government of El Salvador’s Chivo wallet also counts Silvergate as an important financial partner.

Slivergate CEO Alan Lane, second from right, is applauded as he rings the New York Stock Exchange opening bell before the bank's IPO begins trading, Thursday, Nov. 7, 2019. (AP Photo/Richard Drew)

Slivergate CEO Alan Lane, second from right, is applauded as he rings the New York Stock Exchange opening bell before the bank’s IPO begins trading, Thursday, Nov. 7, 2019. (AP Photo/Richard Drew)

In a filing with the SEC on Wednesday, Silvergate said recent changes have altered the timing and results of its annual report. Citing both financial and regulatory challenges, the company said it is assessing how much these changes may affect its “ability to continue as a going concern in the twelve months following the release of these financial statements.”

Silvergate said it has also sold additional debt securities to repay interest on about $4.3 billion in loans taken out with the Federal Home Loan Bank of San Francisco. It also cited ongoing regulatory investigations, private lawsuits and ongoing inquiries from lawmakers as potential risks to the business going forward.

According to data analysis firm S3 Partners, 82% of Silvergate’s total float is estimated to be sold short, making it the most shorted US stock by the amount of float sold short. Shares in Silvergate have lost more than 95% of their value over the past year.

Elsewhere, crypto exchange Kraken said it would limit transactions with Signature (SBNY), another US bank that caters to crypto businesses, as Bloomberg first reported on Wednesday. The move has been attributed to Signature’s earlier decision in early December to reduce its business with crypto-related firms.

“Kraken maintains a variety of funding methods to ensure clients can always deposit and withdraw from their account. Consumers still have access to a variety of payment methods through our other partners. Clients can contact the client engagement team to find out what options are available for them,” a Kraken spokesperson said in a statement.

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