Binance says it has no exposure to Silvergate

Silvergate offered traditional banking services to a number of large crypto exchanges

The world’s biggest crypto exchange Binance said it has no exposure to Silvergate Capital, expecting to quieten the nerves of clients unnerved by the bank’s collapse on Wednesday.

Binance does not have asset losses at Silvergate, Binance founder and Chief Executive Officer Changpeng Zhao tweeted shortly after Silvergate said it will shut down its operations.

Silvergate offered traditional banking services to a number of large crypto exchanges. The bank had suffered huge losses on its portfolio of bonds when the mass flight from crypto as an asset class amid FTX’s collapse resulted in Silvergate’s crypto clients withdrawing their funds from the bank to fulfil redemption requests from their own customers.

The news of the bank’s decision to liquidate dealt a severe blow to crypto currency prices, pushing Bitcoin down to a one-month low before recuperating somewhat to be at $21,651, down 1.3 per cent, by 09:15 GMT. Shares in crypto-focused firms like Coinbase, Riot Platforms, and MicroStrategy all dropped in premarket trading as well.

Customers also continued to withdraw their money from Binance USD, the native token used to clear a large part of the trading activity on the platform. Its outstanding market capitalization has dropped by half to just more than $8 billion in the past month and is down by two-thirds since the collapse of FTX.

Binance’s U.S. operations, like a lot of others, had banked with Silvergate in the past. Though, it seemed to have modified its relationship over time. Reuters reported last month that Binance.US had shifted over $400 million from Silvergate to other accounts during the first three months of last year. The report was noteworthy for its claim that the asset transfer had been instigated by Binance’s offshore operations, something that would weaken Zhao’s persistent claims that Binance.US operates separately from its unregulated affiliate.

Reuters cited a message from Catherine Coley, the CEO of Binance.US at that time, saying that the transfers had taken place without her knowledge, calling them ‘unexpected’ and saying ‘no one mentioned them.’

The news outlet also said a person familiar with the matter as stating that Binance finance executive Susan Li had access to the account of Binance.US Silvergate, and noted that a 2021 Binance.US document recognised Silvergate as a payment channel managed at the time by Binance.com.