Coppola Comment

This is the story of a bank that put all its eggs into an emerging digital basket, believing that providing non-interest-bearing deposit and payment services to crypto exchanges and platforms would be a nice little earner, while completely failing to understand the extraordinary risks involved with such a venture.  On 1st March, Silvergate Capital Corporation announced that filing of its audited full-year accounts would be significantly delayed , and warned that its financial position had materially changed for the worse since the publication of its provisional results on January 17th, when it reported a full-year loss of nearly $1bn. The stock price promptly tanked, falling 60% during the day:   Platforms, exchanges and other banks halted or re-routed transactions on Silvergate's SEN payments network, and customers that had other banking relationships removed their deposits. In response, Silvergate halted the SEN network. A banner on its website now reads: Effective immediately

Coinbase recently filed its interim financial report. It makes pretty grim reading. A quarterly net loss of over $1bn, net cash drain of £4.6bn in 6 months, fair value losses of over 600k... To be sure, Coinbase is not on its knees yet. It still has $12bn of its own and customers' cash (both are on its balance sheet), and a whopping asset base. In fact its assets have increased - a lot. As have its liabilities. Coinbase's balance sheet is five times bigger than it was in December 2021.  Here's Coinbase's balance sheet, as reported in its 10-Q filing . I've outlined the relevant items in red:   There's a new asset called "customer crypto assets" worth some $88.45 bn, matched by a new liability called "crypto asset liabilities". This asset and its associated liability are by far the biggest items on Coinbase's balance sheet. Footnotes to the balance sheet describe these new items as "safeguarding assets" and "safeguarding lia