The bankruptcy of US firm Silvergate Capital Corporation’s major payments network has left a $400 million crypto fund manager searching for Swiss and Bahamas banks to compensate for the loss.
Silvergate Discontinues SEN Platform
Since the collapse of FTX in November, experts have warned about the potential spread or systemic impact of the crypto exchange’s failure on the broader sector. It’s believed that Silvergate, the California-based bank that serves as a foundation for cryptocurrency transfers, may have suffered significant losses due to FTX’s demise.
Silvergate Bank heavily relies on client deposits, which have decreased since its primary client, FTX, filed for bankruptcy. On March 02, Silvergate announced that it would not be able to meet the Securities and Exchange Commission’s annual report deadline due to the need to re-evaluate its business plan and financial viability.
On March 03, the bank issued a statement on its website, explaining that it had made a risk-based decision to suspend the Silvergate Exchange Network (SEN). However, all other deposit-related services are still functioning normally.
After the Silvergate crisis, DACM turned to Swiss banks.
Silvergate Bank, which recently warned of potential financial instability, has suspended its Silvergate Exchange Network (SEN) platform, used by institutions to transfer funds to cryptocurrency exchanges.
On March 03, Digital Asset Capital Management (DACM), a cryptocurrency hedge fund with over $400 million in assets, announced that it is seeking a new banking partner in Switzerland due to the disruption caused by Silvergate’s actions.
DACM had previously used Silvergate’s real-time network to transfer funds to and from Coinbase Global’s platform.
Richard Galvin, the co-founder of DACM, stated that while some US banks can handle cryptocurrency transactions, they do not have the same level of commitment to the industry as Silvergate. He mentioned that DACM is currently in talks with specific Swiss banks, but finding a new partner may take some time. However, he did not disclose the names of the banks.
Galvin noted that the Silvergate network provides fast transfers between accounts, exchanges, and over-the-counter trading desks. However, with the uncertainty surrounding Silvergate, transferring funds to cryptocurrency exchanges has become more challenging, and the process may take longer than usual.
Will Swiss and Bahamas Banks Plug the Hole Left by Silvergate?
Silvergate’s real-time bank money transfers made it a popular choice among cryptocurrency firms, and the loss of this resource may result in longer transfer times for funds.
In the US, Signature Bank is the second most popular fintech bank for cryptocurrency businesses, with Coinbase’s top clients already switching their banking transfers to it. Meanwhile, Swiss banks Sygnum Bank and SEBA Bank have established themselves in the digital-asset sector.
Deltec Bank & Trust and Capital Union Bank in the Bahamas are also well-known for their crypto focus. Due to the lack of clear market laws, crypto firms have always had challenges finding banking partners. However, the Silvergate crisis has made transferring cash to cryptocurrency exchanges even more difficult.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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