Prices of Silvergate Capital Corp’s shares dipped by over 20 percent on Tuesday after an announcement that it wouldn’t launch its stablecoin before the year ends.
Early Tuesday, the firm’s stock prices were already under pressure after reporting the latest trends as per its earnings release.
The bank stated that clients didn’t exchange their cryptocurrencies as quickly amid the current bear market, comparing trends to those of previous quarters. By mid-Tuesday, Silvergate’s shares dropped by $14.39, down to $56.
Silvergate Planned on Launching New Stablecoin Payments Initiative
Initially, Silvergate intended to launch a new stablecoin payment system, which it developed after purchasing assets from Diem, the failed META stablecoin project.
Silvergate planned on debuting the project before the year ended. However, after the Q3 earnings report was released, the CEO said that it will no longer take place as scheduled.
According to Mark Palmer, a financial analyst with BTIG, investors expected the growth of Silvergate’s assets to rise from its stablecoin project. This would eventually impact the company’s share price.
As of now, Palmer’s expected $135 per share price fails to account for contributions by the unreleased stablecoin project.
Silvergate CEO Blames Regulatory Compliance for Delay
Based on statements by Silvergate CEO Alan Lane, the delay in rolling out the stablecoin project is due to regulatory compliance.
When addressing questions during a Q&A session, he explained that the issue isn’t because the company is unprepared technology-wise.
As for a potential date for when the stablecoin project will roll out; it’s likely that there is none. Ben Reynolds, the Chief Strategy Officer at Silvergate, explains that the company isn’t in a position to give an update on when the stablecoin will roll out.
Silvergate Reports Customer Deposits Totaling $12 Billion in Q3
Before the Q3 earnings call, Silvergate reported that it had accumulated digital asset deposits worth $12 billion in the third quarter.
In contrast, the bank reported an average of $13.8 billion in Q2, $14.7 billion in Q1, and $13.3 billion in the final quarter of 2021.
Its earnings report also said that the company recorded profits of $43.3 million compared to the $38.6 million of the last quarter.
However, its digital asset user base only increased by 5 percent to 1,667, which is quite a decline from the 17 percent increase in the previous quarter.
Silvergate is known for its unique niche that, despite being in traditional finance, banks on the bigger crypto firms. Its latest earnings report shows decreasing interest in trading cryptocurrencies like Bitcoin.
Considering how the crypto industry is experiencing one of the worst bear markets to date, this could be a growing trend that will persistently affect cryptocurrency firms.