Heavily crypto-heavy Silvergate Capital is cutting 40% of its staff, or about 200 people, due to the current “economic realities” in the cryptocurrency world, the bank announced on Thursday.
The collapse of the cryptocurrency exchange FTP extension triggered a run on Silvergate, forcing the bank to sell loss-making assets to cover an estimated $8.1 billion in withdrawals, the Wall Street Journal reported.
Silvergate saw its crypto-related deposits fall 68% in the fourth quarter, the bank said in an early release of its quarterly results. Silvergate liquidated the debt to cover it, resulting in a loss of $718 million, a total that has reportedly exceeded the bank’s profits since at least 2013.
The bank canceled $196 million it spent last year buying the technology behind Project Diem, a Facebook-backed attempt to launch a stablecoin. Silvergate also unveiled their plan to launch a digital currency using the technology.
The staff cuts, effective Wednesday, contrast with the staffing increases the bank saw in the first half of last year as business grew.
“The digital assets industry has undergone a transformative shift, with significant over-leverage in the industry leading to several high-profile bankruptcies,” the company said in a statement Wednesday. “These dynamics have sparked a crisis of confidence across the ecosystem and led many industry participants to shift to a ‘risk off’ position in digital asset trading platforms.”
Silvergate’s total deposits from digital asset customers fell to $3.8 billion at the end of the fourth quarter, the company said. This is down from $11.9 billion as of September 30.
Chief Executive Alan Lane said the company had taken the necessary steps to ensure cash liquidity in the event of deposit outflows.
The bank’s headcount cuts follow similar cuts in the cryptocurrency sector in recent months, including a 30% reduction in the workforce at cryptocurrency exchange Kraken, which slashed 1,100 jobs in November, and the December cuts of cryptocurrency trading firm Amber Group, which slashed 40% of its workforce, or 300 people.
Layoffs have plagued the cryptocurrency sphere over the past year. A run the CoinDesk report it counts more than 26,000 cryptographic jobs that have disappeared since April.
For Silvergate, ref.inducing the headcount will allow the bank “to continue to deliver a tailored customer experience while prudently managing expenses in a more challenging macro environment,” according to a press release.
The aggregate costs associated with the job cuts are approximately $8 million, consisting primarily of severance pay, employee benefits, and related costs. Most of these expenses are expected to arrive in the first quarter.