Coinbase reveals impact of Silvergate, Signature Bank closures on ops
Coinbase Global Inc (NASDAQ:COIN) has filed its latest quarterly financial report with the Securities and Exchange Commission (SEC), with the document outlining key financial metrics for the first three months of 2023, as well as major risks the company is facing.
The company notes that it relies on bank relationships to provide its platform and custodial services.
However, if these financial institutions are subject to bank resolution or failure, or limit or end their cryptomarket activity, this may potentially lead to reduced activity on Coinbase’s platform which may adversely impact its business, operating results, and financial condition.
Coinbase states that its business and operations have not been materially affected by the closures of Silvergate Capital Corp and Signature Bank and the cessation of their real-time fiat currency payment networks in March 2023, large cryptoeconomy participants, including Coinbase and its institutional customers, experienced a temporary inability to transfer fiat currencies outside of standard business hours.
Let’s note that Coinbase had earlier stated that as of close of business Friday March 10 Coinbase had an approximately $240m balance in corporate cash at Signature.
In its SEC filing, Coinbase warns that actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry, or the financial services industry generally, or concerns or rumors about any such events or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
For example, in March 2023, Silvergate Capital Corp. announced it would wind down operations and liquidate Silvergate Bank. Soon after, the FDIC was appointed receiver of Silicon Valley Bank and Signature Bank. In connection with these issues and issues with other financial institutions, the prices of fiat-backed stablecoins, including USDC, were temporarily impacted and may be similarly impacted again in the future.
Further, if the instability in the global banking system continues or worsens, there could be additional negative ramifications, such as additional all market-wide liquidity problems or impacted access to deposits and investments for customers of affected banks and certain banking partners, and Coinbase’s business, operating results and financial condition could be adversely affected.