Facts behind the Shelved Launch of Silvergate’s Digital Currency 

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On Dec. 31, 2022, Silvergate was recently in the news for its ambitious plans to launch its digital currency. In addition to its fourth-quarter financial results, Silvergate Capital Corp revealed that its crypto-related deposits have dropped by 68 percent from the previous quarter to $3.8 billion. 

The reported factors involved in the decision

The Market insider magazine outlined some of the factors that were involved in Silvergate’s decision to take a $718 million loss by selling debt securities to raise cash has the potential to affect its future drastically. It was a calculated move, taken after much consideration of many factors and variables.

The decision involves multiple aspects of the company, such as focusing on liquidity and capital management while also considering potential stockholder reactions. Silvergate had planned to launch its digital currency but made the conscious choice to shelve this endeavor in favor of others that could generate income more quickly.

By raising cash through long-term debt sales, Silvergate hopes to secure funding for other projects without going through traditional routes like taking out loans or issuing additional shares of stock. In addition, reducing leverage and increasing equity can help improve credit ratings and preserve investor confidence in the long run.

The news has prompted questions about the impact this will have on Silvergate’s plans to launch its own digital currency, which had been announced earlier in the year but is reportedly being shelved temporarily due to market conditions and regulatory uncertainty.

The decision to lay off forty employees and pare back their businesses is being met with mixed reactions from industry insiders and customers alike.

Various reasons for shelving this launch

Silvergate Bank, a digital banking provider for cryptocurrency companies and investors has made the difficult decision to shelf the launch of its digital currency. To move forward with this plan, Silvergate had to make the even harder decision to lay off 40 members of its staff and pare back several businesses.

The bank’s CEO Alan Lane stated that recent market conditions in the cryptocurrency sector led them to believe that their plans would be too risky. He noted that while launching their digital currency was an ambition they had hoped for, it was ultimately not the right decision at this time.

Lane further expressed his regret over having to part ways with so many talented individuals on their team.

Latest update on the financial implications of the cancellation

An online news site also reported the impact of this cancellation. The decision has had major financial consequences for the bank, costing them $718 million in losses from selling debt securities to raise cash.The issuing of debt securities is common among companies and banks during times of economic stress or uncertainty. Still, Silvergate’s decision was made primarily due to the pandemic and its need to secure liquidity. The proceeds from this issuance were used primarily for general corporate purposes and capital investments related to the development and potential launch of their digital asset offering.

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