- In a Wednesday filing, Silvergate bank stated that losses could leave it with less capital than necessary.
- The bank has closed its SEN Platform, which was used by institutions to move funds to crypto exchanges.
- Coinbase and Galaxy have stopped accepting payments via Silvergate Network.
Circle, USDC stablecoin issuance company, has today announced that it has moved its USDC reserve deposits out of Silvergate Bank to other banks as the bank’s woes deepen.
Circle stated that it made the decision to sell the small portion of USDC it still had in Silvergate as a result of ongoing uncertainty at this bank. Silvergate set off alarms Wednesday with a filing that stated that losses could leave the bank without sufficient capital and that it was reviewing its ability to continue. The bank also stopped paying preferred stock dividends.
The bank’s shares immediately started to plummet following the turn of events and key partners including Paxos Trust Co., Coinbase Global Inc., and Galaxy Digital Holdings Ltd. Cut off ties with the bank. Silvergate was also stopped accepting payments by other crypto companies.
The huge exodus of partners threatens the bank’s key source of deposits seeing that it was a major cryptocurrency player in the US.
Protection of reserve funds
Circle said in the press statement that the top priority of its bank is to preserve the USDC reserves, even if that meant cutting off all ties with Silvergate Bank.
Interestingly, Circle started withdrawing its USDC deposits from Silvergate last year as signs of trouble and broader crypto asset risk exposure became increasingly visible on Silvergatee’s end.
Circle maintains that USDC reserves are in the Circle Reserve Fund, as well as several US banks with high capital. The Circle Reserve Fund has 80% of USDC reserves. Deloitte is a leading audit company that reviews the reserves on a monthly basis.
