This article comes fromwall street journalwall street journal

Odaily Translator | Nian Yin Si Tang

, Original Author: David Benoit

Odaily Translator | Nian Yin Si Tang

The FTX debacle triggered crypto-friendly bank Silvergate Capital Corp. to be forced to sell assets at a hefty loss to handle about $8.1 billion in withdrawals.Cryptocurrency-related deposits plummeted 68% in the fourth quarter, the bank said in a preliminary release of its quarterly results. To process these withdrawals, Silvergate liquidated debt held on its balance sheet. The $718 million lost on the sale of the debt far exceeds the bank's total profits since at least 2013.。

In addition, the bank has already laid off 40% of its workforce, or about 200 employees, and said it would cut operations. The company shelved plans to launch its own digital currency, writing off $196 million it spent

Buy technology built by Facebook in failed attempt to start a cryptocurrency-based payments networkIt is reported that Silvergate provides services to companies engaged in encryption business, takes their deposits, and operates a network that connects investors with cryptocurrency exchanges. FTX and other companies controlled by founder Sam Bankman-Fried (SBF) account for about $1 billion in deposits at the bank.。

FTX's November crash rocked crypto markets

Leading to a sharp drop in Silvergate's share price

The reason Silvergate has survived such a sharp drop in deposits is because it is structured differently than most banks. It sold most of its traditional banking operations and branches to focus on providing bank accounts to cryptocurrency exchanges and investors. Crypto-related deposits make up about 90% of the bank's total deposits, and almost all of the bank's deposits are in the form of cash or easily marketable securities.

The bank said it remains committed to the crypto industry and has the funds to navigate an "ongoing period of transition."

Silvergate also said it had $4.6 billion in cash on hand at the end of the fourth quarter of 2022, more than $3.8 billion in remaining deposits. In addition, it holds $5.6 billion in bonds, such as U.S. Treasuries, that can be sold quickly. Average daily transaction volumes on the Silvergate network rose in the fourth quarter of last year, the bank said."While Silvergate is taking decisive action to address the current environment, its mission has not changed," the bank said in a statement. "Silvergate believes in the digital asset industry.", The collapse in the cryptocurrency market has also raised questions about the viability of the bank's business model. Earlier this week, the Federal Reserve, the Office of the Comptroller of the Currency and the FDIC issued aJoint Statement, highlighting the main risks of banking organizations related to crypto-assets and the crypto-asset space, and presenting the regulatory approaches of various institutions to this field.

Joint Statement

, highlighting the main risks of banking organizations related to crypto-assets and the crypto-asset space, and presenting the regulatory approaches of various institutions to this field.

In particular, the statement lays out several key risks related to crypto-assets and the crypto-asset industry, including the potential for fraud, scams and deception, and the susceptibility of stablecoins to bank runs.

In addition, agencies will continue to take a cautious approach to each banking organization's current or proposed cryptoasset-related activities and exposures, given the significant risks in the sector highlighted by the recent collapse of several large cryptocurrency firms. The above-mentioned agencies will continue to closely monitor the exposure of banking organizations to crypto-assets and will issue additional statements as necessary regarding the involvement of banking organizations in crypto-asset-related activities.

Silvergate's shares have fallen more than 70% in the past three months, and its shares are heavily shorted. The trade has been profitable, adding more than $400 million to short positions last year, according to S3 Partners.

The stock bounced back on Wednesday, rising 27%, its biggest gain since 2020.