Capital was involved in a situation where they took a $196 million impairment charge when writing down the value of intellectual property and technology that they had acquired from the diem group. this represented a 98% loss compared to the $200 million silvergate paid for the assets. the plan to launch a stablecoin using the assets was announced in the third fiscal quarter of 2021, but the launch is now firmly on hold.
the situation happened in the crypto world, which is known for its uncertain regulatory backdrop. investors could not expect a stablecoin project to launch anytime soon, and silvergate reported a 68% drawdown on its deposits and a $718 million loss on debt liquidated to fulfill withdrawals, as well as a headcount reduction of 40%. as a result, the company’s stock price plummeted 43%.
the impairment charge was due to the difficulty of bringing a stablecoin to market in the crypto environment. this was compounded by facebook’s decision to abandon the project, as several of its partners, such as mastercard, visa, and ebay, pulled out. silvergate’s chief executive alan lane had previously suggested that the stablecoin launch was unlikely to happen within the year, and his comments caused the bank’s stock price to slump 23%. jp morgan analysts voiced their optimism for the potential of diem to bolster silvergate’s long-term earnings, though no timeline was given for the launch.