• Silvergate, a California-based crypto bank, is suspending dividend payouts in order to remain liquid during the crypto market’s liquidity crisis of 2022.
• The crypto bank’s primary focus is maintaining a highly liquid balance sheet with a strong capital position.
• Losses were due to several macroeconomic factors and crypto-related events, including a shift in monetary policy that saw central banks hike interest rates to tame inflation.
Silvergate, a state-chartered bank that went public in 2019 and became the first crypto bank listed on the New York Stock Exchange, recently announced that it would suspend dividend payout on its “5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A” to preserve its capital position. The crypto bank said that its primary focus is maintaining a highly liquid balance sheet with a strong capital position, in order to be able to navigate the high volatility in the crypto market.
The decision to suspend dividends comes in response to the crypto market’s liquidity crisis of 2022, which saw prices peak at around $70,000 in November 2021 before plunging to $15,300 in November 2022. This drop was attributed to a number of macroeconomic factors and crypto-related events, including a shift in monetary policy that saw central banks hike interest rates to tame runaway inflation.
The move to suspend dividend payments will leave Silvergate with more capital than customers’ digital assets. However, the bank’s board of directors will re-evaluate the payments of quarterly dividends depending on how market conditions evolve. There was no official comment from any of Silvergate’s executives.
In the meantime, the bank has urged its customers to remain vigilant about any digital currency trading activities, and to be aware of the risks associated with such activities. The bank also recommends that customers diversify their investments and that they consult with a financial advisor before making any decisions.
Overall, Silvergate’s decision to suspend dividend payments is a prudent move to protect itself from the volatility of the crypto market. The bank is confident that its capital position and liquidity will remain strong and allow it to navigate the challenging times ahead.