The cryptocurrency industry is on edge once again as leading crypto-friendly bank Silvergate is on the verge of failure, just 4 months after the collapse of FTX. Fear and uncertainty have taken over the markets as some of the largest players in the sector visited the bank.
Since the FTX collapse caused a run on deposits, Silvergate experienced a problem the previous year. The withdrawals were a factor in Silvergate’s almost $1 billion loss in the last three months of 2022.
The release of the publicly traded bank’s 2022 annual report has been postponed. It acknowledged having “going concerns” about how it would make ends meet. In order to assess “internal controls over financial reporting,” Silvergate has asked the Securities and Exchange Commission (SEC) for more time.
The audit of the bank’s fourth quarter financials has not yet been signed by Crowe LLP, Silvergate’s financial auditors. As FTX failed, customers withdrew more than $8 billion in deposits from Silvergate.
Several providers of digital assets are actively severing their ties with Silvergate. Circle, a USDC issuer, recently declared that it was “unwinding” its partnership with Silvergate, which would have an effect on some of its services. Coinbase announced that it would stop using Silvergate to handle deposits and withdrawals in the meantime.
However, amid the rising concerns, it is rumored that Citadel Securities, which already has a stake in the American bank, will step in to save the day. Andrew said on Twitter that Citadel might put more money into Silvergate to help it out of its liquidity crisis.
He wrote on Twitter, “UPDATE: Internal rumors at Silvergate $SI that Citadel could step up and bail them out; cash infusion where capital shortfalls exist. Citadel Securities is the worlds largest market maker and owns 5.5% of Silvergate Bank $SI.”