Coinbase, the largest cryptocurrency exchange in the U.S. in terms of trading volume, today announced it is halting payments to and from Silvergate bank.
Citing recent developments around the San Francisco-based crypto bank and “out of an abundance of caution,” Coinbase said it is “no longer accepting or initiating payments to or from Silvergate.”
“Coinbase will be facilitating institutional client cash transactions with our other banking partners and have taken proactive action to help ensure that clients experience no impact from this change,” the exchange said in a Twitter thread Thursday.
Coinbase will be facilitating institutional client cash transactions with our other banking partners and have taken proactive action to help ensure that clients experience no impact from this change.
— Coinbase (@coinbase) March 2, 2023
Coinbase went on to say that it holds client funds at FDIC-insured U.S. banks and government money market funds when "when a client has a large dollar balance."
The exchange also assured that it has "de minimis corporate exposure to Silvergate."
LedgerX, one of the few entities that remained solvent in the aftermath of the FTX collapse, made a similar move earlier this week, saying that going forward it will use Signature Bank instead.
Insolvency fears for Silvergate
Coinbase’s decision comes just a day after Silvergate Capital Corporation, the parent company of Silvergate Bank, delayed its annual 10-K report, saying that further unreported losses could mean the bank is "less than well capitalized."
According to Silvergate’s SEC filing Wednesday, the company was also assessing the impact of these events on "its ability to continue as a going concern."
Silvergate already reported a $1 billion loss in the previous quarter as it was forced to sell assets at fire-sale prices to remain liquid and minimize the consequences of a bank run sparked by the FTX collapse.
Last month, the bank said it expected to sell $1.7 billion of additional assets soon to repay a loan from the Federal Home Loan Bank of San Francisco.
Silvergate’s stock (SI) is under another stress in pre-market trading on the back of the news, tanking more than 40% to around $9.20 before the opening bell.
To pile more pressure on the company, JPMorgan downgraded Silvergate to “Underweight” from “Neutral,” while also withdrawing its price target for the stock.