Silvergate Capital has halted its stablecoin plans because of a disappointing earnings report and plunging stock. It recorded quarterly earnings of $1.28 per share for Q3 2022, missing estimates of $1.45.
Whilst Silvergate Bank’s digital assets customers increased, its payment system – the Silvergate Exchange Network (SEN) – saw a 41% drop in US dollar transfers. As such, the firm will also delay plans to launch its stablecoin.
Alan Lane, Silvergate CEO, said the firm purchased the technology assets of Diem, Meta’s now abandoned the stablecoin project, in January 2022 for $182 million. Silvergate announced plans to create an in-house token by integrating Diem assets into SEN. The bank said such a process would cost the firm $30 million. Lane, during Silvergate’s first quarter earnings call in 2022, said stablecoins can be a meaningful payment rail for consumers and businesses around the globe.
But this time around, the CEO said the project will not be launched by the year-end. Lane said Silvergate is working closely with regulators to ensure the product is up to the appropriate standards when launched. The firm plans to back the token with US dollar; additional details about reserves have not yet been revealed. The delay is attributed to regulators taking a closer look at stablecoins following the collapse of Terra’s algorithmic stablecoin. But optimism around the industry remains intact. This comes with traditional financial companies expressing greater interest in cryptocurrencies.
While Lane is optimistic, he said it will take time for things to settle down.