Today, digital asset bank Silvergate Capital provided a fourth quarter business update revealing that digital asset customer deposits declined to $3.8 billion at the end of last year, down 68% compared to Q3. . Despite what was effectively a bank run, it managed to remain liquid, although it turned to the wholesale funding markets during the fourth quarter using debt securities as collateral. In recent years, the bank has had a roller coaster.

In the fourth quarter, it sold $5.2 billion of debt securities to meet withdrawals and lost $718 million on the sale of securities and derivatives in the fourth quarter of 2022. However, cash and cash equivalents held at the end of 2022 exceeded total digital asset customer deposits.

Silvergate operates the Silvergate Exchange Network (SEN), which provides an input and output fiat currency to blockchain companies. Its average daily volumes in the fourth quarter were $1.3 billion, up from $1.2 billion in the third quarter. However, it can be assumed that the cash flow directions may have been different.

As part of the announcement, the bank said it will lay off 200 employees representing 40% of its workforce after a hiring spree in 2022.

Silvergate shares fell 40% this morning. Its current price of $11.72 is down nearly 80% since early November, before the FTX crash. He has $150 million in deposits for bankrupt companies, $93 million of which is believed to be related to FTX and is the subject of a Justice Department seizure. The bank is also the subject of a class action lawsuit related to FTX/Alameda. FTX notoriously had clients deposit funds through an Alameda Silvergate bank account, prompting inquiries from senators. Before the fraud charges, we explored the problems with these wire transfers.

Diem was written but not out

In addition, Silvergate wrote off $196 million related to its investment in Diem technology that it acquired from the Facebook-founded stablecoin startup a year ago. He said that the launch of a stablecoin solution “is no longer imminent.” Diem’s ​​payment consideration was primarily in stock with $50 million in cash, for a total of $182 million. But at the time, it also predicted $30 million in costs through 2022.

However, the bank is not ready to get rid of Diem entirely, as it still has staff working on the project.

“We are cognizant of the fact that there are significant hurdles to launching anything in the near future,” Silvergate CEO Alan Lane said on a conference call. “So we’ll have to keep looking at the expenses that we’re incurring for that hopeful (launch) result going forward.”