Mar 2, 2023

Silvergate Bank announced it would delay the filing of its annual report on Wednesday, sending its stock price plunging.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Silver Gate Bank stock is plunging after the crypto Friendly Bank said it is delaying the filing of its annual report. Joining us now with more is coin gold policy regulation. Managing editor Nick Day who's also the editor of coins, the state of crypto newsletters. So Nick, good morning, some of Silver Gate's reasons for delaying its annual report have investors on edge what's going on. Hey, good morning. Yeah. So yesterday Silver Gate said that it would not be able to file its annual 10-K report on time. And what's more it actually wouldn't be able to file by an extension deadline of March 16th either. Uh the bank crypto Friendly Bank said that um first off, it has to work with its auditors to answer some questions. Look at its books again. So that's one of the issues it has. Um it's also uh apparently has to repay um the FHLB uh some of the outstanding loans that it took out to basically cover for the crypto sector last year. Um The forward-looking statement section was I think one of the most interesting though, uh among the other things that it said, it said it has to face uh increase from Congress questions from bank regulators and possible increase from the US Department of Justice. Suggesting there is a major probe of the bank and its operations ongoing. Uh It concluded in the forward looking statement section by saying that its ability to go uh to be a going concern for the next 12 months may be in doubt suggesting it might in fact have to shut down over the next year. Um Of course, these are forward looking statements, those are kind of meant to be warnings as to, you know, here to some of the concerns that you know, might arise in our business over next year. So I wouldn't say it's definitive yet, but the fact that it's putting all these details into a filing saying, oh yeah, by the way, we can't tell you what we did last year yet because we have to, you know, redo all of our numbers, all that not really a good sign. And as you mentioned, uh premarket Ilg stock is down, I think about 44% as of a few minutes ago. Wow. So two big things there, Silver Gate is hinting at regulatory scrutiny in its forward looking statements and noting that it is less than well capitalized. Uh And you know, there are questions around its ability to stay in business there. There's also a bit about finance and um its role with Binance dot us. How how does that fit into the picture? So to be clear, the filing yesterday didn't mention Binance or any concerns about the exchange. But it is worth noting that yesterday's filing comes just days or you know, barely a week after Reuters reported that Binance Global, the International US ex uh International crypto Exchange had been able to access Binance Us Silver Gate bank account and transfer funds. Now, uh you know, obviously this is not good for a number of reasons if you're a bank. One of the big things being, you know, if you've done due diligence with a certain company, you expect that company to be the one to access, you know, funds, you don't expect it to be the international affiliate. So, you know, this is a similar thing to what happened with FTX. We saw that FTX had access to us bank accounts and obviously things went poorly. So I imagine this is gonna be one of the areas that regulators are really curious about that. You know, this may be if I had to speculate, uh this may be, you know, fairly top of mind for some of those, you know, bank regulated inquiries and possibly even the DOJ inquiries. Now, II I think we should probably step back a little bit here and explain the importance of Silver Gate to the crypto world, especially in the United States. Um You know, just just how important is it uh when it comes to crypto companies that operate in the US. Well, traditionally US banks have not been wild about crypto companies, most of them don't provide services to crypto companies. And um that's been an ongoing issue for the crypto industry. Silver Gate and Signature Bank are two of the, you know, the two most prominent names in the US for banks that provide services to crypto companies. And um you know, it's obviously not a big list. So if silver is having troubles and especially if it's having issues related to its crypto business or because of the crypto business, uh which seems um you know, fairly more than likely at this point, then that's first off, not good for the companies that it services. Uh It suggests that, you know, it may have a, you know, liquidity issues. If you're using a Silver gate bank, it it's probably gonna be something you have to look elsewhere. Now, I think Coinbase just announced that uh for example, it would be looking toward Signature bank instead of silver moving forward. Uh Ledger X I believe is in a similar boat. So first off, not good for, you know, if you're looking for a choice of banks, signature might uh yeah, signature may be like the only, you know, bank left standing, but also from like a broader industry perspective. You know, if you're a bank and you're thinking, hm this crypto industry is having a rough couple of years but maybe it's looking up, maybe it's time to start providing services to it, you know, to a company in this industry. Uh you're not gonna look at Silver Gate and say, oh yeah, that's a good sign, you know, that's gonna be a pretty big red flag if in future you decide. Ok. You know, crypto stabilized, all the companies are suffering for bankruptcy. Um, you know, here's this company asking for banking services. You know, if you're a bank, you might not want to go that far. You might not want to, uh, you know, provide any services for crypto. So knowing that the last major bank that provides services for crypto, uh you know, had all these issues and regulatory scrutiny and congressional scrutiny and DOJ scrutiny. Um, Nick, there's been sort of like murmurs or not even murmurs more like shouts in the crypto industry about like the, you know, the government is trying to deba crypto and, you know, I I, what do you think about some of those sort of alarm bells that people are, are, are ringing on the one hand, I try not to, you know, pay too much attention to rumors of, you know, government conspiracies. On the other hand, it's hard to argue that banking regulators in particular have been, you know, ramping up their concern about crypto. But I guess the question is, you know, what's causing that? Right. If, is it just uh, you know, personal preference from, you know, the heads of these regulatory agencies and the president and others in the government that crypto be de banked or is it a response to, you know, last year when, uh, you know, more than half a dozen major crypto companies filed for bankruptcy, a lot of them turned out to have, you know, had issues with their banking. Um, you know, like I, I would say, it's probably like a lot more nuanced than just being able to say, oh yeah, this is a conspiracy to, you know, kill crypto or to shut crypto off from banking, but it's definitely been a rough couple of months for the crypto industry and you know, regulators saying, oh yeah, we're concerned about, you know, exposure to all these companies that are doing, you know, whatever and now filing for bankruptcy, you can like, I can't see where they come from. You know, it's um if not the most logical response, it is a fairly log, you know, logical response. Well, so far Silver Gate has been downgraded by JP Morgan can accord amid doubts of the bank's solvency. So we'll continue to monitor, monitor that story. Nick, thank you so much for the update that was Coindesk, managing editor of Global Policy and Regulation N Day. Don't forget to sign up for the state of crypto newsletter on coindesk dot com.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.