Silvergate Capital in La Jolla, Calif., said it will cut 40% of its workforce and table plans for a blockchain-based payment solution after losing $8.1 billion of digital asset deposits during the fourth quarter.
The $15.5 billion-asset company, which is dealing with deposit outflows in its digital assets business, said in a press release that it will reduce headcount by about 200 positions “to account for the economic realities facing the business and industry today.”
Silvergate said it is providing laid-off employees with severance packages and job placement resources, adding that it expects to incur $8 million of charges – mostly in the first quarter.
The company also said it had exited the mortgage warehouse business in the fourth quarter, which will result in a $4 million restructuring charge. Plans are underway for Silvergate to streamline its digital asset product portfolio “to reduce complexity while ensuring its institutional clients have the tools they need to continue operating efficiently.”
Silvergate also said that it will record a $196 million impairment charge in the fourth quarter tied to developed technology assets purchased from the Diem Group. The company said it believes the launch of a blockchain-based payment solution “is no longer imminent.”
The charge comes less than a year after the company paid $182 million in cash and stock for intellectual property and other technology assets from Diem Group.
Silvergate also provided an update on its balance sheet, noting that deposits tied to digital assets clients fell by 68% in the fourth quarter from a quarter earlier, to $3.8 billion. About $150 million of the company’s deposits were from customers that have filed for bankruptcy.
The outflows are equal to about 61% of Silvergate’s total deposits on Sept. 30.
The company noted that it had $4.6 billion of cash and cash equivalents on Dec. 31. It sold $5.2 billion of debt securities during the fourth quarter, resulting in a $718 million loss.
Silvergate also said that it held $2.4 billion of short-term brokered CDs and $4.3 billion of short-term FHLB advances on Dec. 31.
The company reported $700 million of FHLB advances on Sept. 30.