Leading crypto exchange Coinbase has terminated its partnership with the California-based financial institution Silvergate Bank following reports of the bank’s financial troubles, which could lead to possible bankruptcy.
Silvegate shares (SI) declined close to 30% earlier today, shortly after the bank said it would delay the submission of its annual financial report to the United States Securities and Exchange Commission (SEC), demanding additional time as it’s currently evaluating its capabilities to remain functional.
Coinbase Ditches Silvergate for Signature Bank
In a Twitter post on Thursday, Coinbase announced that it would no longer use Silvergate as a banking partner for its Coinbase Prime customers. The news brought Silvergate’s shares down to more than 40% in pre-marketing trading.
The exchange further stated that it would not accept or initiate payments from or to the bank, in light of recent developments and out of caution.
Given the financial condition of Silvergate, Coinbase told its customers in a memo that the company is changing its dollar banking partner to Signature Bank, asking users to update their payment instructions accordingly.
“Coinbase Prime has elected to make changes to our USD banking partners. We are facilitating fiat withdrawals and deposits using Signature Bank, effective immediately. We are asking you to update your Coinbase Payment instructions to Signature Bank,” the company said.
Additionally, the exchange said it had zero exposure to the fintech company.
In January, Silvergate reduced its workforce to 40% while selling off its assets at a loss to cover over $8.1 billion withdrawn from the bank.
Ledger Terminates Contract With Silvergate
Shortly after the Coinbase announcement, stablecoin issuer Circle Internet Financial also disclosed that it was in the process of “unwinding” certain services with the bank.
1/ We maintain relationships with several banking partners. We are sensitive to the concerns around Silvergate and are in the process of unwinding certain services with them and notifying customers. Otherwise, all Circle services, including USDC are operating as normal.
— Circle (@circle) March 2, 2023
Earlier this week, Ledger, an FTX subsidiary not linked to its financial woes, sent a letter to customers indicating that it will no longer accept wire transfers from Silvetgate. Like Coinbase, the company also chose Signature Bank to facilitate institutional wire transfers for its customers.
Meanwhile, Silvergate’s troubles started with the collapse of Ledger’s parent firm, FTX, which suffered a severe liquidity crisis before becoming bankrupt in November 2022.
The Fintech company is being investigated by the U.S. Department of Justice (DOJ) over its involvement in the FTX fiasco. Prosecutors are looking into an account owned by FTX founder and former CEO Sam Bankmam-Fried, which Silvergate managed.
Silvergate and its CEO Alan Lane are charged in another lawsuit for helping Bankman-Fried, and two of his companies operate a multibillion-dollar fraudulent scheme.
