Silvergate’s chief executive officer has again claimed that the funds of the consumers are secure, but many are still apprehensive. The firm had considerable exposure to FTX and BlockFi via deposits. Silvergate, the entity considered to be a crypto bank, is endeavoring to reassure its clients that their funds are secure under its custody, although the company was exposed to FTX as well as BlockFi. Alan Lane, the CEO, issued an open letter dispelling any related concerns.
Silvergate Asserts Limited Exposure to Bankrupt BlockFi and FTX
In that letter, Lane mentioned that a lot of speculation as well as misinformation is frequently circulating in the community as the opportunists and short sellers are doing great efforts for that. As per Lane, the respective letter was to offer the true record. The executive explained that thorough due diligence has been performed by Silvergate over FTX and its associate firm Alameda Research.
Lane then asserted that the firm still contains ample liquidity as well as a robust balance sheet. The letter has it mentioned that the deposits of Silvergate’s consumers are safe (as they have always been in the past). In addition to this, he even noted that the whole portfolio of the entity could be allocated for borrowings and could eventually be traded if the need arises regarding the liquidity to appease the withdrawal request of the customers on the platform.
In his words, the company follows its strategy of keeping extra securities and cash in comparison with the existing deposit liabilities related to digital assets. It seems that the connection between FTX and Silvergate is restricted to just deposits. FTX denoted a ten percent proportion of the cumulative digital asset deposits (nearly $11.9B) of the Silvergate customers.
The crypto bank is additionally exposed to BlockFi (the other firm which submitted a bankruptcy filing). It had up to twenty million dollars in client deposits to BlockFi. As this news emerged, the rating of the shares of Silvergate has been downgraded by Morgan Stanley. An 8.49% downfall has been witnessed in the shares of the firm in the previous twenty-four hours.
Silvergate to Develop a Stablecoin Service with Meta’s Diem Project
Silvergate Capital has gone through a double blow due to the recent decline of the crypto markets, as a result of its FTX and BlockFi exposure. Though it remains to be seen what happens next to the crypto bank, it seems that the platform is shielded against the above-mentioned bankrupt companies. One of the best things being done by Silvergate is that it has acquired the Diem network (the failed project of the social media giant Meta).
The parent company of Facebook eventually gave up on the stablecoin product thereof after being fed up with the mounting scrutiny over it. Keeping this in view, Silvergate bought its assets. The price paid by the crypto bank in return for the Diem project was nearly $182 million. The crypto bank brought to the front that the Diem network would be of great help to the platform in providing a basis for a registered stablecoin payment facility.
In Silvergate’s words, the respective service would be released by the company this year. Nevertheless, the crypto winter appears to have put a drastic impact on the Diem project as Silvergate has not provided any details about it up till now.