Silvergate Capital Corp., a traditional bank that positioned itself as a key settlement firm in the crypto world, announced last week it was discontinuing its crypto payments network. The firm, which combines fiat money services with digital-asset services, acts as a key partner to fintech and crypto companies.
Used by some of the largest exchanges in the world, Silvergate’s highly popular exchange network enabled round-the-clock transfers between investors and crypto exchanges, unlike traditional bank wires, which can often take days to settle.
In 2022, Silvergate could not account for more than $8 billion in deposits from its crypto customers as it was affected by the industry’s implosion. The company had been facing scrutiny from US banking watchdogs that have insisted that conventional banks should not concentrate on crypto.
Some analysts feel the firm peaked in 2021, with the volume on the Silvergate exchange network hitting a high during the year with $406 billion in transfers. That number had crashed to $230 billion by the second half of 2022.
What does this mean for me?
Crypto heavyweights. including Coinbase Global, Inc., and Galaxy Digital, have quickly dropped Silvergate as their banking partner. Silvergate shares on Friday slumped more than 2% in after-hours trading. The shares on Thursday had fallen to a record low, ending the day down more than 97% from their all-time high in November 2021.
This latest high-profile collapse of a key pillar in the crypto world is another body blow to crypto supporters, who had hoped the industry would be on a path to recovery in 2023.