Crypto-heavy Silvergate Capital is cutting 40% of its staff, or about 200 people, because of current “economic realities” in the crypto world, the bank announced Thursday.
The collapse of crypto exchange FTX triggered a run on Silvergate, forcing the bank to sell assets at a loss to cover roughly $8.1 billion in withdrawals, The Wall Street Journal reported.
Silvergate saw its crypto-related deposits drop 68% in the fourth quarter, the bank said in an early release of quarterly results. Silvergate liquidated debt to cover that — at a loss of $718 million, a total that reportedly surpasses the bank’s profits since at least 2013.
The bank wrote off $196 million it spent last year buying the technology behind the shuttered Diem project, a Facebook-backed attempt to launch a stablecoin. Silvergate also tabled its own plan to launch a digital currency using the technology.
The staff cuts, effective Wednesday, stand in contrast to headcount increases the bank saw in the early half of last year as business grew.
“The digital asset industry has undergone a transformational shift, with significant over-leverage in the industry leading to several high-profile bankruptcies,” the company said in a release Wednesday. “These dynamics have sparked a crisis of confidence across the ecosystem and led many industry participants to shift to a ‘risk off’ position across digital asset trading platforms.”
Silvergate’s total deposits from digital-asset customers declined to $3.8 billion at the end of the fourth quarter, the company said. That’s down from $11.9 billion as of Sept. 30.
CEO Alan Lane said the company has taken the steps necessary to ensure cash liquidity in the event of deposit outflows.
The bank’s headcount cuts follow similar cuts in the crypto business in recent months, including a 30% workforce reduction at crypto exchange Kraken, which cut 1,100 jobs in November, and December cuts by crypto trading firm Amber Group, which cut 40% of its workforce, or 300 people.
Layoffs have plagued the crypto sphere in the last year. A running CoinDesk report tallies more than 26,000 crypto jobs that have vanished since April.
For Silvergate, reducing headcount will allow the bank “to continue to offer a tailored customer experience, while prudently managing expenses in a more challenging macro environment,” according to a press release.
Aggregate costs associated with the job cuts are around $8 million, consisting mostly of severance payments, employee benefits and related costs. Most of these charges are expected to come in the first quarter.