Due to persistent regulatory issues, Coinbase announced that the cryptocurrency exchange will no longer accept payments from Silvergate.
Coinbase Global Inc., the biggest cryptocurrency exchange in United States, recently declared that it has terminated ties with Silvergate Bank, its U.S. dollar banking partner, citing the ongoing investigation as the cause of the hurried decision.
The exchange would now make it easier for Silvergate rival Signature Bank to conduct cash transactions. The revelation comes after Silvergate disclosed in a filing with the U.S. Securities and Exchange Commission (SEC) on Wednesday that the company may have “less than well-capitalized” assets and that it was “reevaluating its business.”
During the pre-market hours, the price of the shares dropped to an all-time low. The California-based exchange was cited as saying the following in a memo distributed to its clients:
“Coinbase Prime has elected to make changes to our USD banking partners. We are facilitating fiat withdrawals and deposits using Signature Bank, effective immediately.”
Yet, reports claim that Coinbase has little corporate exposure to Silvergate and thus anticipates little to no impact. Several of the top stablecoin issuers, including USDC, GUSD, and TUSD, have some of their dollar reserves in Silvergate Bank as of December 2022.
The FTX Contagion
The fintech bank’s downhill trajectory started with the collapse of the FTX crypto exchange. The Silvergate Bank is the subject of an investigation by the US Department of Justice on its involvement in FTX’s demise.
The bank was frequently referred to as the “crypto bank” since it serves so many businesses with a focus on cryptocurrencies. Silvergate is currently among the most shorted firms on the market as a result of the ongoing investigations and the breakup of partnerships.
The Financial Industry Regulatory Authority reported that as of the end of January, short positions comprised more than 72% of the outstanding shares of Silvergate Capital Corp. The share price of Coinbase decreased by 4.9% in pre-market activity at the time of writing as a result of the most recent Coinbase news.
