Silvergate Capital has terminated its Silvergate Exchange Network (SEN) after a bank that specializes in digital assets questioned its validity.
SEN, the bank’s platform for cryptocurrency transactions, is one of its most popular offerings. In contrast to traditional bank wires, which might take days to clear, this service allowed investors and cryptocurrency exchanges to transact at any time.
In the wake of increasing uncertainty, Silvergate clients have distanced themselves from the bank, pushing consumers to send assets elsewhere while assuring them of the safety of their cash.
With a $1 billion loss at the end of the fourth quarter and more losses in January and February, the cryptocurrency bank acknowledged in a filing on Wednesday that it may need to assess its sustainability.
At the same release, the bank admitted that bank authorities and the U.S. Department of Justice were investigating it. It claimed that its ability to continue as a “going concern” for the next year was doubtful.
The next day, several significant crypto customers, including industry giants Galaxy Digital and Coinbase, departed the bank, and its stock price fell by almost 60 percent before recovering on Friday.
The SEN was suspended after banking regulators issued many warnings to the financial institutions they supervise on the dangers linked with crypto exposure, including volatility.
According to experts, there are inherent hazards associated with crypto exposure. Cryptocurrencies, unlike conventional investments, are decentralized and often unregulated, leaving investors susceptible to market instability and fraud.
In addition to lacking the stability of established financial institutions, cryptocurrencies are susceptible to sudden and dramatic price fluctuations. Furthermore, the security of cryptocurrency exchanges and digital wallets might be compromised, resulting in the loss of funds.
Before investing in cash, investors should examine their risk tolerance and extensively research cryptocurrency investments. Understanding the possible risks and benefits of investing in this fast-changing economy.
Before its suspension, the SEN was seen as a significant advance in the digital currency sector since it provided a trustworthy and safe platform for institutional investors and corporations to conduct digital currency transactions.
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