Crypto banking group Silvergate Capital further cooled its stablecoin ambitions last week, slashing the value of assets that it purchased from a defunct Facebook crypto project.
Silvergate disclosed that it took a $196 million impairment charge during its final fiscal quarter of last year, writing down the value of intellectual property and technology that it acquired from Diem Group early last year.
The revised figure represents a 98% loss compared to the $200 million it paid for the assets. Silvergate had planned to launch a stablecoin using the assets last year, announcing plans to do so in its third fiscal quarter of 2021.
Silvergate Stock Down 40% Following Diem Write-Off, Job Cuts
The company said it planned to integrate the assets it got from Diem into its Silvergate Exchange Network (SEN), an around-the-clock system for transferring money used by its institutional clients. Silvergate said last week, however, that the stablecoin’s launch is firmly on hold.
“Given the significant changes in the digital asset industry landscape, this charge reflects the Company’s belief that the launch of a blockchain-based payment solution by Silvergate is no longer imminent,” the company reported.
In a business update conference call, Silvergate CEO Alan Lane said that the impairment charge was because it would be difficult to bring a stablecoin to market “anytime soon,” citing the current crypto environment.
Diem Selling Assets to Silvergate for $200M, Ending Facebook’s Stablecoin Project
Michael Perito, managing partner at investment bank KBW, described the impairment charge Silvergate took on its Diem assets as part of the typical accounting process companies take in reviewing intangible assets.
“You need to be able to have a reasonable estimate as to when something might turn tangible, and I think the regulatory backdrop in the crypto world right now is just really uncertain,” he told Decrypt. “Near term, Silvergate investors probably shouldn't get their hopes up that a stablecoin project is going to launch.”
The company also reported a 68% drawdown on its deposits during its final fiscal quarter of last year, as well as a $718 million loss on debt liquidated to fulfill the flurry of withdrawals. Additionally, the bank disclosed it would cut its headcount by 40%.
Following the update, Silvergate’s stock price plummeted. It closed out the trading day 43% lower than the day before at $12.57 per share.
Lane had previously pumped the brakes on Silvergate’s stablecoin launch last October, advising it appeared unlikely to happen within the year.