Crypto exchange Coinbase ditches lender Silvergate

March 2 (Reuters) – Cryptocurrency exchange Coinbase Global Inc ( COIN.O ) cut financial ties with Silvergate Capital Corp ( SI.N ) on Thursday, saying it had minimal exposure to the lender, whose latest filing raised questions about its ability to remain being. in Business.

Coinbase said it would work with other financial institutions to facilitate cash transactions for customers who had parked funds with the exchange, and that it had stopped accepting or initiating payments to or from Silvergate.

Silvergate’s shares plunged to a record low of $6.80 after the announcement, while Coinbase’s shares fell nearly 10% to $58.04.

“This does not bode well for the entire crypto market, as Silvergate is a major player in the space,” said Marcus Sotiriou, an analyst at digital asset broker GlobalBlock.

“The outcome of this remains to be seen, but we could potentially see a contagion from crypto businesses using Silvergate Bank being affected,” Sotiriou added.

The crypto exchange’s decision comes as Silvergate seeks to chart a course out of the liquidity crisis it was thrown into after FTX’s bankruptcy last year, which spurred customers to withdraw billions of dollars in deposits.

On Wednesday, Silvergate delayed its annual report, saying it had sold additional debt securities — investments that can include bonds and notes — to repay debt this year and was evaluating the impact of those events on “its ability to continue as a going concern.”

“The bank has become somewhat of a lightning rod victim of circumstance given the industry’s news flow in recent months,” Canaccord Genuity analysts wrote in a note after the disclosure.

The bank has also become a target for short sellers. Short interest in Silvergate stock is estimated to be as much as 22.6 million shares, or 82% of the float, making it the most shorted stock in the U.S. in terms of percentage of the float, according to data from research firm S3 Partners .

Silvergate, one of the most influential banks in the digital asset industry, was founded in 1988 and ventured into crypto in 2013.

Besides Coinbase, Kraken is also one of the best clients.

Reporting by Niket Nishant in Bengaluru; Additional reporting by Elizabeth Howcroft in London Editing by Uttaresh Venkateshwaran, Sriraj Kalluvila and Anil D’Silva

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