Silvergate Capital Corporation announced the closure of its cryptocurrency payment network on Friday, March 3. The parent company of Silvergate Bank, a bank offering cryptocurrency services, added that the decision was effective immediately.
Logging on to the company’s website, a brief warning message reads, “Effective immediately, Silvergate Bank has made a risk-based decision: to discontinue Silvergate Exchange Network (SEN). All other deposit-related services remain operational.”
Silvergate Exchange Network was one of Silvergate’s flagship products. It was a settlement network that connected companies, large investors and exchanges 24 hours a day, an advantage over traditional banking and settlement systems that could take days in some cases.
Among the clients of this service were well-known companies in the industry, such as Binance.US, Kraken or Gemini.
According to Coindesk, a company spokesperson sent a message similar to the one posted on the portal directly to Silvergate customers and cryptocurrency companies.
Silvergate Capital had previously questioned its ability to remain operational this year. The company was re-evaluating its business and strategies, something that has resulted in the immediate closure of SEN.
The news of Silvergate had affected the cryptocurrency market to the downside. Bitcoin (BTC) fell below $23,000, the top 100 altcoins entered a landscape of steep declines and traders betting on the upside lost some $200 million.
Silvergate was one of dozens of companies affected by the bear market and the FTX exchange debacle late last year. The market’s fears are about the possible domino effect that another fall like this could have on other companies in the industry.
Silvergate would return nearly $10 million to BlockFi; other companies disassociate themselves.
Also Friday, Judge Michael B. Kaplan issued an order compelling Silvergate Bank to return $9.85 million to BlockFi, which had deposited it into Silvergate’s reserve fund.
Documents released by BlockFi’s restructuring advisor account for such a decision, which was issued with reference to an agreement between Silvergate and BlockFi dating back to November 2022.
Meanwhile, companies such as Tether Limited (issuer of the USDT stablecoin) and MicroStrategy, a publicly traded company with more bitcoins in its reserves, have disassociated themselves from the potential collapse of Silvergate.
In the case of Tether, its CTO Paolo Ardoino simply posted that they have no exposure to Silvergate Bank; for its part, MicroStrategy reported that its only link to Silvergate is the outstanding payment on a $205 million loan due Q1 2025. But its bitcoin collateral is not held in custody by the bank, they claimed.
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