Investing

Silvergate Takes Charge, Reviews Options After Depositors Withdraw Majority of Digital Assets Amid String of Crypto Flameouts

Greg Morcroft

Published: January 6, 2023 3:37 am

Last Updated: January 6, 2023 11:38 am

Silvergate Capital (US:SI), a provider of financial infrastructure solutions for the digital asset industry headquartered in La Jolla, California, fell almost 50% Thursday after it said that it would take a $196 million impairment charge in Q4 2022 and lay off staff after depositors withdrew the lion’s shares of their digital assets after several recent industry failures.

It also said it is reviewing its developed technology assets purchased from the Diem Group that, “reflects its reassessment of its blockchain-based payment solution.”

The company’s Silvergate Exchange Network (SEN) provides real-time clearing and settlement services for digital asset transactions and had an average daily volume of $1.3 billion in the fourth quarter.

In Q4 2022, the company had a total net income of $12.3 million, compared with $20.8 million in Q3.

The run on the bank shrank total deposits from digital asset customers to $3.8 billion at the end of Q4 from $11.9 billion at the end of Q3. Silvergate’s SEN Leverage commitments also fell to $1.1 billion at the quarter end, and the average outstanding balance of SEN Leverage loans was $328 million. All SEN Leverage loans continued to perform as expected, with no losses or forced liquidations.

The digital asset industry has recently undergone a transformational shift, with the collapse of the futures trading platform FTX leading to several high-profile bankruptcies and a crisis of confidence across the ecosystem. This has caused many industry participants to shift to a “risk off” position and led to a decline in Silvergate’s total deposits from digital asset customers. Silvergate has taken steps to maintain cash liquidity and currently holds a cash position in excess of its digital asset-related deposits.

Lane said during a conference call with analysts after the news that the bank is “open to considering any options to maximize shareholder value.” This includes potentially being acquired by a larger institution. However, he also emphasized that Silvergate is focused on providing services to the digital asset industry and does not plan to leave the space. Lane also noted that it is likely that a larger institution will eventually want to enter the digital asset space and take a look at Silvergate.

This article originally appeared on Fintel