Cryptocurrency exchange Coinbase recently announced the end of its relationship with California-based crypto-friendly bank Silvergate. The exchange has stated that it will no longer accept or initiate payments to or from the bank.
Coinbase has mentioned its “abundance of caution” in light of recent developments due to the delay of its former partner Silvergate’s annual report. The exchange has also said that all customer funds will remain “safe, accessible, and available.” Coinbase added:
Coinbase will be facilitating institutional client cash transactions with our other banking partners and have taken proactive action to help ensure that clients experience no impact from this change.
Furthermore, Coinbase has stated that there will be no changes to its fiat withdrawal process following the end of its partnership with Silvergate. In addition, Coinbase has selected Signature Bank “effective immediately” and is asking its customers to update their Coinbase withdrawal instructions to this New York-based commercial bank.
Adverse Reaction To Both Coinbase And Silvergate Shares
Coinbase, the second-largest cryptocurrency exchange by spot trading volume with over 108 million users, has seen its shares follow a downward trend in the wake of the news. Coinbase shares are trading down over 6% following the announcement.
The company’s stock, traded under the ticker COIN, has paused its growth on the Nasdaq Stock Market, trading at $58, down over 9% on a broader seven-day basis, after hitting the $67.40 mark at the end of February. COIN has a market capitalization of $15.3 billion as of press time.
On the other hand, Silvergate shares have plunged 29% premarket after delaying its annual report and raising concerns among investors.
Silvergate’s stock under the ticker SI closed the market on Wednesday at $13.50 and is currently trading at $7.75 on the Nasdaq, down 80%, after a solid first quarter, reaching $22 on February 16.
Previously, Silvergate reported a loss of $1 billion in the fourth quarter of 2022 as investors withdrew capital amid the FTX debacle.
The company said in a filing to the U.S. Securities and Exchange Commission that it would be unable to file its annual report and further extended the deadline for filing it to March 16. Silvergate Bank also mentioned in the filing that it had sold the additional debt to repay its loans in 2023. The company added:
The Company is evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements. The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.
Silvergate is currently performing additional procedures and providing documentation requested by its accounting firm to complete the audit process. Moreover, Silvergate expects a positive change compared to its fourth-quarter report to address its investors’ concerns.
Feature image from Unsplahs, charts from TradingView.com.