MicroStrategy confirmed that none of its 130,000 BTC is custodied by Silvergate. However, the firm does have a loan to pay off to the bank by Q1 2025.
Business intelligence firm MicroStrategy and stablecoin issuer Tether have become the latest two firms to publicly deny any meaningful exposure to Silvergate Bank.
The news comes after Silvergate announced on March 1 that it would postpone the filing of its annual 10-K financial report, which has many fearing the cryptocurrency bank may be on the brink of a bankruptcy filing.
This led MicroStrategy — which holds over 130,000 Bitcoin (BTC) — to confirm that its BTC collateral is not custodied with Silvergate.
The Michael Saylor-founded firm added that it will not need to pay back a loan from Silvergate until Q1 2025 and that a bankruptcy or insolvency event wouldn’t “accelerate” the loan repayment.
We have a loan from Silvergate not due until Q1 ‘25. There are mkt concerns re SI’s fin. condition. For anyone wondering, the loan wouldn’t accelerate b/c of SI insolvency or bankruptcy. Our BTC collateral isn’t custodied w/ SI & we have no other financial relationship w/ SI.
— MicroStrategy (@MicroStrategy) March 2, 2023
Paolo Ardoino, the chief technology officer of Tether, confirmed in a March 2 tweet that Tether is not exposed to Silvergate either.
#Tether does not have any exposure to Silvergate.
— Paolo Ardoino (@paoloardoino) March 2, 2023
A collapse of the cryptocurrency bank could prove costly for the rest of the industry.
Silvergate is a fintech firm that provides financial infrastructure solutions and services to some of the largest cryptocurrency exchanges, institutional investors and mining companies in the world.
It offers a 24/7 payments platform, named Silvergate Exchange Network, which has reportedly processed over $1 trillion in transactions since 2017.
The firm also provides a stablecoin infrastructure platform, digital asset custody management and collateralized lending services to several institutional players in the cryptocurrency industry.
Despite the large network effects, the late 10-K filing appears to have had a consequential effect on its partnerships.
Within 24 hours of the late 10-K filing, Coinbase, Circle, Bitstamp, Galaxy Digital and Paxos confirmed that they will scale back their partnerships with the cryptocurrency bank in some capacity.
Gemini also announced that it has stopped accepting customer deposits and processing withdrawals through Silvergate ACH and wire transfers.
Others who have seemingly cut or reduced ties include Crypto.com, Blockchain.com, Wintermute, GSR and Cboe Digital, according to reports.
Silvergate failed to file their annual report citing regulatory investigations. Possibly not solvent.
They already lost majority of their partners. pic.twitter.com/LKdQtNfRRe
— Quinten | 048.eth (@QuintenFrancois) March 2, 2023
Concerns of Silvergate’s potential financial troubles first surfaced in Q4 2022, when it reported a net loss of $1 billion as a result of the shock collapse of FTX in November.
Related: Coinbase no longer accepts payments via Silvergate Bank
The exact dealings between Silvergate and FTX have been subject to a probe by the United States Department of Justice recently, although there’s been no accusation of wrongdoing at this point.
Plaintiffs in a newly proposed class-action lawsuit against FTX on Feb. 14 accused Silvergate of “aiding and abetting” a “multibillion-dollar fraudulent scheme” that was orchestrated by former FTX CEO Sam Bankman-Fried.
Despite many firms recently claiming not to have exposure to Silvergate, the bank still processed over $3.8 billion in customer deposits in Q4 2022. This was a steep fall from $11.9 billion in Q3 2022, according to Silvergate.
Since the news of the late 10-K filing on March 1, Silvergate’s stock price has fallen a massive 58.7% to $5.57. The stock is now down over 97% since its all-time high of $219.7, hit on Nov. 14, 2021.
