MEXCSilvergate Ditches Its Digital Currency Plan; Writes Off $196 Mn In Crypto Acquisition
In February of last year, Silvergate officially announced the purchase of Diem Group, a Facebook-affiliated company along with its intellectual property & other technological assets necessary to operate the blockchain-based payment system. Facebook abandoned its digital currency project in 2021 in response to persistent pressure from political and regulatory authorities.
Silvergate’s Crypto Ambitions
Silvergate was Facebook’s first choice when choosing which company would issue the USD-based stablecoin. However, the Federal Reserve warned Silvergate & threatened to freeze the firm, which dealt an effective and fatal blow to Meta’s blockchain aspirations.
Read More: Silvergate Stock Crashes Nearly 50% As Firm Struggles With Crypto Deposits
However, the failure of the cryptocurrency exchange FTX triggered a run on Silvergate Capital Corp., which caused the bank to be forced to liquidate assets at a significant loss in order to cover the approximately $8.1 billion in withdrawals.
In a filing with the SEC, the firm was quoted as saying:
Given the significant changes in the digital asset industry landscape, this charge reflects the company’s belief that the launch of a blockchain-based payment solution by the company is no longer imminent,
Silvergate further stated that they would continue to investigate new avenues for extracting value from these technological assets. The crypto-friendly bank acquired the software assets from Facebook, now Meta, with the intention of initially launching the cryptocurrency around the end of 2022.
Silvergate’s Dismal Q4 Figures
According to the bank’s early release of quarterly figures, cryptocurrency-related deposits dropped by 68% during the final quarter of 2022. In order to meet the withdrawals, the company liquidated the debt it held on its balance sheet. This also includes an impairment charge of $196 million relating to the buyout of Diem as well as the layoff of 200 employees at a total cost of $12 million in severance payments.
As things stand, the Silvergate (SI) stock is currently trading at a pre-market valuation of $13.20, which is a whopping -40% decline from its last traded value of $21.95.
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