Silvergate, the prominent crypto bank, is facing trouble as there was an alarming decline in crypto deposits. In recent times the company has met with a more significant loss. So, to stabilise itself, the company has cut its staff by 40%.
However, instead of giving fruitful results, the scarcity of staff turned worse, and 68% of the decline in crypto deposits occurred. Moreover, the company was also selling assets at a loss to cover $8.1 billion of customer withdrawals.
The Wall Street Journal reported on Thursday that the abrupt demise of FTX caused a run on Silvergate, forcing the bank to sell assets at a deep discount to fund the roughly $8.1 billion in consumer withdrawals.
To cover customer withdrawals, the cryptocurrency bank sold $5.2 billion worth of debt instruments it had on its balance sheet. As a result, it suffered a $718 million loss, which significantly outweighs all of the bank’s earnings since at least 2013.
In addition, Silvergate recorded a 68% decline in its crypto-related deposits in the fourth quarter of the year, the bank purportedly said in an early release of specific quarterly figures. The total deposits made by users of digital assets decreased from $11.9 billion on September 30, 2022, to $3.8 billion at the end of 2022.
Despite this, the bank is still committed to cryptocurrencies and, according to reports, has the resources to manage a “continuous era of transition.”
Additionally, 200 employees, or 40% of the bank’s workforce, were laid off. Along with this, the bank abandoned ambitions to introduce its own digital currency and wrote off the $196 million it spent on the technology that Facebook had developed in its unsuccessful attempt to build a crypto-based payments network.
As a “leading bank for creative enterprises in fintech and cryptocurrencies,” Silvergate defines itself. However, its primary activity was processing payments between cryptocurrency exchanges like FTX and crypto hedge funds like Alameda.
Investigations into the crypto bank’s potential role in enabling illegal transactions are also ongoing. Three U.S. senators sent Silvergate a letter on December 6 requesting information about the bank’s role in client losses brought on by the collapse of the FTX exchange.
In contrast to their $3.8 billion in remaining deposits, Silvergate reported having $4.6 billion after the fourth quarter. The crypto bank also has financial assets, including U.S. Treasury bonds worth about $5.6 billion that are readily tradable. In a statement, it was said:
“Silvergate’s objective hasn’t altered, even though it’s taking serious action to survive the present climate. Silvergate supports the market for digital assets.”
The company’s stock is already down more than 37% in the pre-market after losing around 88% of its value in 2022. This means that the company is paying extra for cutting the staff.