Silvergate Capital cut to Neutral at BofA on potential delay of stablecoin pilot

BofA Securities analyst Brandon Berman downgraded Silvergate Capital ( NYSE: SI ) to Neutral from Buy as he expects that legislators' attention will turn to troubled crypto exchange FTX and away from stablecoin legislation, temporarily delaying Silvergate's pilot launch of its own stablecoin. As a result, Silvergate's ( SI ) "first mover" advantage "appears to be diminishing," Berman wrote in a note to clients, pointing out that Circle Internet Financial — the issuer of stablecoins USDC and EUROC — is making progress in the ecosystem. A possible impact of the FTX liquidity issue could be institutional clients trading on FTX pull their deposits from that exchange and transfer fund to the client's deposit account at SI or to another exchange. "If the non-FTX exchange is also a client of SI's then the transfer would occur over (SI's) SEN" network, he said. "We don’t expect SI to incur loan losses/forced liquidations on the back of these events (confirmed via an 8K); however, we are lowering our SEN Leverage growth forecast from stable Q/Q to down 50%," Berman wrote. Silvergate ( SI ) stock slumped 12% in Wednesday trading as most crypto-related stock declined along with crypto assets, such as bitcoin ( BTC-USD ), after Binance backed out of a preliminary agreement to acquire FTX's non-U.S. exchange. In after-hours, the stock is down 3.4% more. Note that in late October, the SA Quant system flagged Silvergate for a high risk of performing poorly . That contrasts with the average Wall Street rating of Buy . Earlier, bitcoin ( BTC-USD ) extends drop after Binance backs down from FTX rescue.