Silvergate, a California-based crypto bank whose shares are listed on the New York Stock Exchange, is suspend dividend payments remain very liquid as the digital currency market tries to emerge from the 2022 liquidity crisis.
In a January 27 press release, Silvergate, a state-chartered bank that went public in 2019, said it will suspend dividend payments on its “5.375% Non-Cumulative Perpetual Preferred Stock, Series A” to preserve capital.
Focus on Liquidity
The crypto bank said its primary focus is maintaining a liquid balance sheet with a strong capital position. This will give you an advantage as you navigate the high volatility in crypto. The move means crypto banks will have more capital than their customers’ digital assets.
The bank’s board of directors will re-evaluate the dividend payout every month depending on the evolving market conditions.
There was no official comment from Silvergate executives.
High volatility in the crypto saw the price peak around $70,000 in November 2021 before plunging to $15,300 in November 2022.
Losses due to several macroeconomic factors and crypto-related events. Shifts in monetary policy have led central banks to raise interest rates to tackle inflation.
Instead, this shift has seen capital flow in other directions, away from what investors typically label as “risky”, including crypto and stocks, to safe havens like bonds and gold.
Silvergate Forced To Take Bold Steps
The collapse of several CeFi platforms, first 3AC, Voyager, and BlockFi, before FTX said it was ending withdrawals and eventually filed for Chapter 11 bankruptcy protection, devastated the market. As a result, crypto assets surrendered, with Bitcoin collapsing until 2022.
At one point, FTX was worth more than $32 billion. It later emerged that Sam Bankman-Fried misappropriated client funds through an exchange-related trading firm, Alameda Research.
The risk to the safety of investors spilled over to Silvergate, stretching the crypto bank. On January 17, Silvergate published its financial report with the Securities and Exchange Commission of the United States (SEC), saying that it will lose $949 million in 2022. This is a clear reversal since the bank made a profit of $75.5 million in 2021.
Earlier this month, Silvergate clients withdrew nearly $8 billion in crypto deposits. Reports show that approximately 66% of the bank’s clients withdrew their coins in the last three months of the year. In turn, the bank was forced to sell $5.2 billion in assets to cover costs and stay liquid amid rapid changes in the industry.
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