Coinbase stops exchange with Silvergate Bank

Coinbase, the largest cryptocurrency exchange in the US, has announced the halting of payments to and from Silvergate bank, citing recent developments around the San Francisco-based crypto bank and out of an abundance of caution. Coinbase stated that it is no longer accepting or initiating payments to or from Silvergate, and it will be facilitating institutional client cash transactions with other banking partners, taking proactive action to help ensure that clients experience no impact from this change. Coinbase assured that it holds client funds at FDIC-insured US banks and government money market funds when a client has a large dollar balance. The exchange also assured that it has “diminished corporate exposure to Silvergate.”

This decision by Coinbase comes just a day after Silvergate Capital Corporation, the parent company of Silvergate Bank, delayed its annual 10-K report, saying that further unreported losses could mean the bank is “less than well-capitalised.” According to Silvergate’s SEC filing, the company was assessing the impact of these events on “its ability to continue as a going concern.” Silvergate already reported a $1 billion loss in the previous quarter, and last month, the bank said it expected to sell $1.7 billion of additional assets soon to repay a loan from the Federal Home Loan Bank of San Francisco.

LedgerX, one of the few entities that remained solvent in the aftermath of the FTX collapse, made a similar move earlier this week, saying that going forward, it will use Signature Bank instead. To pile more pressure on the company, JPMorgan downgraded Silvergate to “Underweight” from “Neutral” while also withdrawing its price target for the stock. Silvergate’s stock (SI) is under more stress in pre-market trading, tanking more than 40% to around $9.20 before the opening bell.

Despite the announcement by Coinbase, the cryptocurrency market seems unaffected, with Bitcoin currently trading at around $60,000, up by 0.47% in the past 24 hours. This move by Coinbase will not affect its day-to-day operations, and clients will be able to continue trading cryptocurrencies as usual. It also highlights Coinbase’s conservative approach to risk management, as the company’s priority is the safety and security of its clients’ funds. The crypto industry remains volatile, and this move by Coinbase reinforces the importance of due diligence in selecting banking partners.

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