Silvergate Crypto Payments Suspended After Suffering $1 Billion Loss
Silvergate Capital has pulled the plug on its Silvergate Exchange Network (SEN) after the bank specializing in digital assets voiced questions about its viability.
SEN, the bank’s platform for crypto payments, is one of its most popular services. Unlike regular bank wires, which might take days to clear, the service enabled investors and crypto exchanges to make transfers at any time.
Viability Doubts Impact Silvergate Exchange Network
In the face of mounting uncertainty, Silvergate clients have distanced themselves from the bank, encouraging customers to direct assets elsewhere while assuring them that their funds are secure.
With a $1 billion loss at the end of the fourth quarter and more losses in January and February, the crypto bank disclosed in a filing on Wednesday that it may need to evaluate its viability.
Image: Yahoo News
In the same announcement, the bank acknowledged that it was the subject of investigations by bank authorities and the U.S. Department of Justice, and stated that its ability to continue as a “going concern” over the next year was uncertain.
The next day, a number of notable crypto clients left the bank, including industry leaders Galaxy Digital and Coinbase, and its stock price dropped by over 60% before stabilizing on Friday.
The Red Flags
The SEN suspension came after banking authorities provided several warnings to the financial institutions they monitor regarding the risks associated with crypto exposure, including volatility.
Crypto exposure carries inherent risks, according to experts. Unlike traditional investments, cryptocurrencies are decentralized and largely unregulated, leaving investors vulnerable to market volatility and fraud.
Cryptocurrencies also lack the stability of established financial systems, making them susceptible to sudden and extreme price swings. Additionally, the security of cryptocurrency exchanges and digital wallets can be compromised, leading to the loss of assets.
Investors are advised to consider their risk tolerance and thoroughly research any cryptocurrency investments before committing funds. It is important to understand the potential risks and rewards of investing in this rapidly evolving market.
Bitcoin (BTC) total market cap at $431 billion on the weekend chart | Chart: TradingView.com
Silvergate launched the SEN in 2017 to serve the growing demand for digital currency payment solutions. The network has gained popularity among institutional investors due to its ability to provide secure, reliable, and efficient payment infrastructure for digital currency transactions.
The bank has positioned itself as a leader in the digital currency space, offering a range of services to support digital currency trading and investment, including custody, lending, and foreign exchange services.
Before its suspension, the SEN has been recognized as an important development in the digital currency industry, providing a trusted and secure platform for institutional investors and businesses to transact in digital currencies.
-Featured image from Sites at Lafayette
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