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Silvergate Ditches Its Digital Currency Plan; Writes Off $196 Mn In Crypto Acquisition

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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.

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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.

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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.

Also Read:What Are Music NFTs? How Are They Changing Music Industry?

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Pratik Bhuyan

Pratik has been a crypto evangelist since 2016 & been through almost all that crypto has to offer. Be it the ICO boom, bear markets of 2018, Bitcoin halving to till now - he has seen it all.

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