“Effective immediately Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational,” Silvergate said in a statement posted on its website. The Silvergate Exchange Network, one of the bank’s most popular offerings, enabled round-the-clock transfers between investors and crypto exchanges, unlike traditional bank wires, which can often take days to settle.
Silvergate has had a rough week, after disclosing on Wednesday that it would delay the filing of its annual report due to questions from its auditors. In the same notice, the bank admitted it was facing investigations from bank regulators and the U.S. Department of Justice, and said its ability to be a “going concern” over the next year may be in doubt. A number of prominent crypto clients bailed on the bank the next day, and its stock price fell nearly 60% before somewhat stabilizing on Friday.
The network shutdown comes after Moody’s downgraded Silvergate’s credit rating for the second time in less than two weeks. Moody’s said it downgraded Silvergate due to insufficient capitalization and “governance deficiencies” after the company delayed its annual report filing and following the company telling the Securities and Exchange Commission it was “less than well-capitalized.”
Although SEN is now shut down, other depos A number of major blockchain industry companies, including Circle, Blockchain.com, Wintermute, GSR, Coinbit-related services are unaffected, according to Silvergate.ase and Paxos, severed ties with Silvergate. The bank recently also will release $9.9 million to distressed crypto lender BlockFi, as stipulated and ordered in BlockFi’s bankruptcy. Silvergate now faces a number of issues, including litigation, as well as regulatory and congressional scrutiny, according to its SEC filing.
The Silvergate Exchange Network billed itself as a 24/7 banking service, which enabled digital currency and institutional clients to send US dollars at any time of day, 365 days a year. Funds could be sent via the service to other Silvergate accounts, and the accounts of other Silvergate clients. Prior to the service falling apart in recent days, crypto platforms such as Coinbase, Bitstamp, Paxos, Gemini and others had signed on to the service as a means of providing further legitimacy to the crypto market.
The service however is just another piece of Silvergate that has fallen apart since the firm revealed that it was “less than well-capitalized” earlier this week. Following that announcement, it has seen a mass exodus of major clients as those clients look for stable banking partners.
Separately, it’s been reported on social media that document disposal trucks are currently in front of Silvergate’s offices, while the offices themselves are rather empty. Market commentators as a result have started drawing parallels to the downfall of Enron two decades ago.
