Dear clients,
The average crypto trader has probably never heard of the Silvergate Exchange Network.
But the suspension of SEN by crypto-struggling bank Silvergate Capital Corp. was another blow to the beleaguered industry. Silvergate has already suffered from runs on deposit, and the shutdown of its flagship payment network raises more questions about whether it can survive. This also creates potential problems for crypto traders.
SEN has been a key element of the financial system for moving money in the crypto industry, allowing clients of companies such as Coinbase, Gemini, and Crypto.com to use US dollars to buy and sell bitcoin, ether, and other digital assets.
It existed as a round-the-clock service that provided liquidity, and its suspension could make it difficult to quickly buy and sell assets in a booming industry that lacks stable and reliable financial partners.
The exchanges are currently looking for other partners that can process dollar deposits and withdrawals. And since there are few alternatives to SEN in the industry, transactions for retail traders may slow down and generally become more complex.
The Silvergate woes are the latest example of the domino effect caused by the crash of the FTX cryptocurrency exchange in November. Last year, the bank experienced a massive outflow after the bankruptcy of FTX, which was a key client.
It wasn’t long before a response, Bitcoin fell to its lowest level in about two weeks. Smaller coins such as Ether, Avalanche, and the Dogecoin meme token have also been affected.
