Silvergate Capital Repositions To Ride The Crypto Storm

A below par financial performance, bankruptcy filings and company closures, exposure to FTX’s collapse, job cuts, and slow down in certain investments or projects were some of the challenges crypto companies faced in the year 2022.

Silvergate Capital, a provider of financial solutions to the digital asset industry, released its financial performance for the year ended December 31, 2022 showing a net loss. Silvergate also confirmed that it had some exposure to Genesis. The company has taken measures to manage its operating expenditure, and has announced the suspension of dividend payments on its preferred stock.

In a January 17, 2023 press release, Silvergate announced its Q4 2022 and full year 2022 financial highlights. Silvergate reported a Q4 2022 net income of US$ 40.6 million and a net loss of about US$ 1 billion. Net income for the year ended December 31, 2022 was US$ 75.5 million, with a net loss of US$ 948 million.

In a January 20, 2023 press release, Silvergate described its exposure to Genesis as limited, with no more than US$ 2.5 million in customer deposits. The crypto lending unit of Genesis filed for US bankruptcy. Silvergate advised that it did not hold any outstanding loans nor have any investments in Genesis.

In November 2022, Silvergate announced that it had limited exposure and no investments in BlockFi. BlockFi, a crypto platform, filed for bankruptcy in late November 2022 citing significant exposure to FTX and its sister cryptocurrency trading firm, Alameda Research.

Silvergate has undertaken a number of measures aimed at sustaining its business operations. These have included a reduction of about 200 employees or about 40% of its workforce and the selling of some of its assets albeit at a loss to manage liquidity. In addition, Silvergate announced the offboarding of some of its non-core customers and eliminating part of its product portfolio.

Silvergate further announced that it will abandon some projects and would write-down almost US$200 million on the Diem project.

In another January 27, 2023 press release Silvergate announced the suspension of dividend payments on its Series A Preferred Stock. According to Silvergate, the reason for this is to preserve liquidity during the current volatile times in the crypto industry. Silvergate’s Board of Directors will review future dividend payments, depending on market conditions.

A number of other crypto companies are taking similar or related measures to ride out the crypto storm and to ensure survival in 2023 and beyond. Only time will tell how effective these measures shall prove to be.