(Reuters) -Cryptocurrency exchange Coinbase Global Inc on Thursday cut financial ties with Silvergate Capital Corp and said it had minimal exposure to the lender, whose latest filing raised questions about its ability to stay in business.
Coinbase said it would partner with other financial institutions to facilitate cash transactions for clients who had parked funds with the exchange, and that it had stopped accepting or initiating payments to or from Silvergate.
Shares of Silvergate nearly halved after the announcement from Coinbase to $7.06 in early morning trading. Coinbase shares were down nearly 7% at $60.12.
The crupto exchange’s decision comes as Silvergate seeks to chart a course out of the liquidity crisis it was plunged into after FTX’s bankruptcy last year that spurred its customers into withdrawing billions of dollars in deposits.
On Wednesday, Silvergate delayed its annual report and said it had sold additional debt securities – investments that can include bonds and notes – to repay debts this year and was evaluating the impact of these events on “its ability to continue as a going concern.”
The bank has also become a target for short sellers. Short interest for Silvergate stock is estimated to be as much as 22.6 million shares, or 82% of the float, making it the most shorted stock in the United States in terms of percentage of float, according to data from analytics firm S3 Partners.
One of the most influential banks in the digital asset industry, Silvergate was founded in 1988 and ventured into crypto in 2013.
Besides Coinbase, Kraken is also one of its top clients.
(Reporting by Niket Nishant in Bengaluru; editing by Uttaresh Venkateshwaran, Sriraj Kalluvila and Anil D’Silva)