Coinbase refused to make payments through Silvergate bank
Cryptocurrency exchange Coinbase refused to conduct payments in U.S. dollars through Silvergate Bank
The bank postponed the publication of its annual financial statements, which led to a drop in its ratings and the refusal of the largest U.S. cryptocurrency exchange to work with it. Silvergate shares plummeted more than 40%
Cryptocurrency exchange Coinbase has refused to work with Silvergate Bank to make payments to its customers in U.S. dollars. The exchange said in a statement that it no longer accepts or sends payments through the bank "out of caution."
Silvergate is a U.S. bank that specializes in cryptocurrencies. The bank operates the Silvergate Exchange Network (SEN) payment system, which allows cryptocurrency exchanges and other customers to exchange cryptocurrencies for fiat money. Many of the world's leading miners, exchanges, and institutional investors have used Silvergate to place and transfer billions of dollars worth of assets.
On March 1, Silvergate said it would delay filing its annual financial report with the U.S. Securities and Exchange Commission (SEC) for two weeks.
The bank said it did not meet the March 16 deadline to file its report because of the continued weakening of its capital. Silvergate also said it is "evaluating its ability to continue as a going concern for 12 months following the release of its financial statements" and is now "in the process of re-evaluating its business and strategies in light of the challenges it faces."
According to CoinDesk, JPMorgan downgraded Silvergate from "neutral" to "insufficient." At the same time, JPMorgan analysts noted that the FTX collapse had a direct impact on Silvergate's financial condition because the bank had about $1 billion in deposits at the bankrupt exchange.
Amid the news of the downgrade and the Coinbase announcement, Silvergate shares fell 40.5%, to $8.05, on the New York Stock Exchange (NYSE) and 41.3%, to $7.9, on the London Stock Exchange (LSE).
Data from research firm S3 Partners suggests that short positions in Silvergate shares could reach 22.6 million shares or 82% of the shares outstanding, Reuters writes. The bank's shares have the largest number of shorts open as a percentage of all outstanding shares.
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