Silvergate Effect? Bybit Becomes Latest Crypto Exchange to Halt USD Withdrawals

Cryptocurrency exchange Bybit, known for offering derivatives instruments, will temporarily suspend US dollar withdrawals from 10 March due to a service outage of its "end-point processing partner."

Bybit to Suspend USD Withdrawals

"Withdrawals via Wire Transfer (including SWIFT) will also be suspended at Mar 10, 2023, 12 AM (midnight) UTC due to the same end-point processing partner. If you wish to make any withdrawals via these methods, please do so before Mar 10, 2023, 12 AM (midnight) UTC," the Dubai-headquartered exchange stated in a notice released over the weekend.

Notice on Suspension of USD Payments via Bank TransferYou may continue to make USD deposits via the Advcash Wallet, or buy cryptocurrencies with your credit card on our One-Click Buy page.More details here: https://t.co/Roae3T4pYJ#Bybit #TheCryptoArk pic.twitter.com/XAUI2AeDJC

However, the platform will still allow users to purchase cryptocurrencies with credit cards. Further, it will continue to enable crypto deposits and withdrawals.

Bybit did not reveal the name of its USD processing partner. However, the confirmation of the suspension came only a day after California-based Silvergate Bank announced its plans to discontinue its digital asset payment network. Once one of the progressive banking institutions towards crypto, Silvergate cited the move as a "risk-based decision."

Silvergate Tldr: "In January we told you we had lost nearly $1bn, but since then we've discovered that we lost a shedload more than that, breached our covenant with FHLB, had to sell securities at a discount to repay FHLB's loans, and now we're not sure we are solvent" pic.twitter.com/fxBiq8gfCd

"The payment gateway interruption is limited in scope and does not involve other fiat or cryptocurrencies and/or account funding channels. Users can still buy cryptocurrencies in USD using their debit and credit cards through other channels. We are closely urging our partners for alternative solutions and will keep our users and stakeholders posted as soon as there are further developments," a Bybit spokesperson said to media houses.

More Such USD Withdrawal Suspensions to Come?

Earlier, Binance temporarily terminated its US dollar deposits and withdrawals, using bank transfers on its global platform. However, the service limitations did not impact its customers in the United States who were onboarded under the US-based arm.

Bybit was founded in 2018 as a crypto derivatives exchange. It expanded services by entering the crypto spot trading market in 2021 and launching options trading in 2022. According to Coinmarketcap, it is the second largest crypto derivatives exchange in terms of trading volume, following Binance, and handled more than $4.2 billion worth of trades in the last 24 hours.

Additionally, the exchange's troubles started because of its exposure to the bankrupt crypto lender, Genesis Global Trading. Bybit's CEO, Ben Zhou, revealed that the exchange has exposure of up to $150 million to Genesis via its investment arm, Mirana Asset Management. Out of the total exposure, $120 million had collateral and has already been liquidated.

The CEO further stressed that the exchange keeps client funds separate, and its lending products do not use Mirana.

Full disclosure: 1. Mirana is the investment arm of bybit. 2. Mirana only manage some bybit company asset. Client fund is separated snd bybit earn product doesn’t use mirana. 3. The reported 151m has abt 120m of collateralized positions which mirana had already liquidated. https://t.co/kqVPpAMGky

Last December, Bybit reduced about 30 percent of its workforce, becoming one of the many crypto companies to restructure their spending primarily by slashing staff.

A Workaround?

Bybit recently announced that the exchange is launching a debit card on the Mastercard network that will enable users to make payments and withdraw cash using cryptocurrencies, including Bitcoin, Ethereum, Tether, USD Coin, and Ripple. It will offer virtual cards at launch and has plans to hand out physical debit cards in April 2023.