- Silvergate has reduced its employees by 40% and announced a reduction in business activities.
- Despite the losses, Silvergate stated that it still plans to offer its clients crypto-related services.
Due to a bank run caused by FTX‘s failure, Silvergate was forced to sell assets at a significant loss to repay withdrawals of almost $8.1 billion. Additionally, the bank fired 200 employees or 40% of its workforce.
The bank reported in a statement that the fourth-quarter decline in crypto-related deposits was 68%. Silvergate sold off its debt to pay for the withdrawals. More money was lost on the transaction by the bank—roughly $718 million—than it had made since 2013.
In response to the drop related to cryptocurrency, Silvergate announced it would cut its personnel by around 40%. Additionally, it wiped off the $196 million Facebook spent on an unsuccessful attempt to launch its blockchain-based digital currency network.
The company also provided a financial update at the same time as the announcement, noting a reduction in asset customer deposits to $3.8 billion at the end of the fourth quarter.
Silvergate offers a range of services to businesses in the cryptocurrency sector, including accepting deposits and setting up a network that links investors to exchanges. The bank’s total deposits were made up primarily of deposits from FTX, a business owned by Sam Bankman-Fried, which contributed around $1 billion.
Silvergate is not organized like most banks, in contrast. Instead, it concentrated on offering services and bank accounts to investors and cryptocurrency exchanges. Around 90% of all deposits made to the bank are made through accounts associated with cryptocurrencies. The bank stated that it is dedicated to the cryptocurrency sector and has the resources to manage a protracted change. Silvergate stated in its filing:
“Reducing headcount will enable the company to continue to offer a tailored customer experience, while prudently managing expenses in a more challenging macro environment”
The bank had more cash than it did in its remaining deposits throughout the fourth quarter. The sum of more than $3.8 billion in its accounts was $4.6 billion. Additionally, it had debt instruments worth another $5.6 billion that it could sell right away, including US Treasury bonds. Additionally, its network’s average daily volume climbed during the fourth quarter.
“While Silvergate is taking decisive action to navigate the current environment, its mission has not changed. Silvergate believes in the digital asset industry”
The average daily trading volume on the Silvergate Exchange Platform was $1.3 billion, an increase from $1.2 billion in the previous quarter. From $1.5 billion, SEN Leverage Commitments decreased to $1.1 billion. In the upcoming weeks, Silvergate will release its complete fourth-quarter results.