Silvergate Capital Cuts 40% of Staff, Halts Digital Currency Plans

Crypto bank Silvergate Capital has announced significant layoffs and restructuring, with around 200 employees, or 40% of its staff, being let go. The news sent the company’s shares down 46% to $11.76.

In addition to the layoffs, Silvergate has also halted its plans to launch a digital currency, and has written off the $196 million related to its acquisition of the technology and assets of Diem Association from Meta Platforms. Diem, formerly known as Libra, was Facebook’s attempt to create a stablecoin, a cryptocurrency pegged to the US dollar or other stable asset.

The restructuring at Silvergate comes amid a significant downturn in the digital asset industry, with macro headwinds and the collapse of firms like Celsius Network and FTX leading to bankruptcies and a crisis of confidence in the sector. The poor performance of Bitcoin and Ethereum the two largest cryptocurrencies by market cap, also contributed to the industry’s struggles, with both falling over 60% in 2022.

Despite the challenges facing the industry, Silvergate’s exchange network saw an average daily trading volume of $1.3 billion in the fourth quarter, up from $1.2 billion in the third quarter. However, the bank also experienced an outflow of $8.1 billion in digital asset deposits during the same period, leading to the sale of $5.2 billion in debt securities and a loss of $718 million. Deposits from customers declined to $3.8 billion in Q4 from $11.9 billion in Q3.

Impact on the Digital Asset Industry

According to Silvergate CEO Alan Lane, the digital asset industry has undergone a “big shift,” with significant overleverage leading to bankruptcies and a shift towards a risk-off approach among industry participants. Lane stated that Silvergate took steps to maintain cash liquidity and currently holds a cash position in excess of its digital asset-related deposits.