The collapse of the FTX exchange has caused a major crisis for the US-based Silvergate Bank, which works with the cryptocurrency industry. The bank warned on Wednesday that it may not be able to continue as a going concern due to its losses from the default of FTX, one of its largest customers.
The Hong Kong-based crypto derivatives platform FTX said on Tuesday that it had lost more than $1 billion of its customers’ money in a huge liquidation event. The exchange said that the problem was caused by a technical glitch and changes in the market and that it would pay back users who were affected.
However, Silvergate Bank said that it had extended $250 million in credit to FTX through its Silvergate Exchange Network (SEN), a payment system that connects crypto platforms and customers. The bank said that it had not received any payments from FTX since the liquidation event and that it was uncertain whether it would be able to recover its funds.
Because of this uncertainty, a number of crypto platforms that work with Silvergate Bank have decided to stop doing business with the bank until further notice. Coinbase, one of the biggest and most popular cryptocurrency exchanges in the world, said on Thursday that it would no longer accept or start payments to or from Silvergate Bank. Other exchanges, like Paxos, Crypto.com, and Galaxy Digital, did the same thing and stopped doing business with the bank.
The news of Silvergate Bank’s troubles sent its share price tumbling by nearly 50% on Thursday, reaching an all-time low of $5.62 per share. The bank’s market capitalization dropped from $1.2 billion at the end of 2022 to $300 million as of Thursday.
Concerns have been raised about the bank’s ability to stay in business and keep its good name in the crypto space, where it was one of the few regulated banks willing to work with crypto-related businesses. The bank has more than 1,100 crypto customers and claims to process more than $200 billion of SEN transactions per month.
Silvergate Bank said it was working with FTX and other parties to fix the problem and get things back to normal as soon as possible. It also said that it had enough cash on hand and capital to meet its regulatory obligations and requirements. It did say, though, that there was no guarantee that it would be able to solve its problems or keep making money in the future.
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