On Thursday, Silvergate Capital, a bank that focuses on cryptocurrency, revealed that it has laid off almost 200 employees, or 40% of its whole workforce.
Customers withdrew deposits in Q4, which caused the bank to postpone plans to launch a digital currency and write off the $196 million it spent to acquire the technology and assets of Diem Association from Meta.
Silvergate currently believes that a blockchain-based payment solution will not be released soon, but it will continue to search for opportunities to profit on the value of the Diem technological assets.
The business stated that consumer withdrawals prompted it to start using wholesale funding. According to the company, this was done in order to handle persistently declining deposit levels and maintain a highly liquid balance sheet. The debt instruments were then liquidated for cash considerations.
The cryptocurrency-focused bank took these steps after cryptocurrencies lost popularity. Due to FTX's rising volatility in the crypto markets, investors are now less confident in the asset class. Alan Lane, CEO of Silvergate, said:
“In response to the rapid changes in the digital asset industry during the fourth quarter, we took commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows, and we currently maintain a cash position in excess of our digital asset related deposits.”
Despite the downturn, Silvergate's Exchange Network Platform kept operating, with daily transaction volume reaching $1.3 billion in the fourth quarter of 2022, up from $1.2 billion in Q3.
SEN Leverage obligations dropped from $1.5 billion at the end of September to $1.1 billion for the end of December 2022. The company claims there have been no losses or forced liquidations related to SEN Leverage loans.
In Q4 2022, the company stopped offering its mortgage warehouse lending product, and that same quarter it took a restructuring charge of $4 million, primarily for severance and employee benefits. It will also streamline its product line in the coming weeks.
However, during the fourth quarter, it experienced a withdrawal of nearly $8.1 billion in deposits for digital assets. When Silvergate sold off $5.2 billion in debt instruments to cover the withdrawals, it suffered a $718 million loss.
As of December 31, 2022, the business held $2.4 billion in short-term brokered certificates of deposit for wholesale funding and $4.3 billion in short-term advances from the Federal Home Loan Bank.