The latest report from the firm indicated that deposits in the fourth quarter of 2022 were $7.3 billion, which was lower than the third quarter figure of $12 billion.
Silvergate Bank currently faces a class-action lawsuit over its Alameda Research and FTX exchange dealings. It announced a $1 billion net loss mainly attributable to common shareholders in the fourth quarter of last year.
In a report that was published by the United States Securities and Exchange Commission (SEC), this digital asset bank highlighted that it saw considerable outflows of deposits in the last quarter of the year and made decisions to maintain cash liquidity, including wholesale funding and selling debt securities.
The firm also cited a “transformational shift” in the digital asset sector. It noted that a crisis of confidence in the entire ecosystem made customers adopt a “risk off” position on cryptocurrency trading platforms.
Based on the report, the average digital asset client deposits in the fourth quarter of last year was $7.3 billion. That is considerably lower when compared to the third quarter of the year where deposits were about $12 billion.
Despite these losses, the firm noted that it is taking action to prepare for a sustained period of lower deposits. Based on the announcement, Silvergate is managing its expense base and evaluating its entire product portfolio and customer relationships.
Amid all these challenges, Silvergate CEO Alan Lane highlighted that the firm is still confident in the digital asset sector and remains highly “committed to maintaining a highly liquid balance sheet with a strong capital position.”
Buy Bitcoin NowOn January 5, the firm sacked nearly 200 employees, which accounted for about 40% of its workforce, as part of its efforts to remain afloat. Furthermore, the firm also postponed plans to launch a digital currency project, writing off $200 million used to buy technology developed by Facebook.
Reacting to this situation, rating company Moody’s Investors Service was quick to downgrade its rating of Silvergate Bank. The rating dropped from Baa2, which was “lower-medium grade,” to Ba1, described as ‘junk’. Apart from that, Moody’s also highlighted that the outlook for both Silvergate Capital and its bank is negative.
