MicroStrategy and Tether Distance Themselves from Silvergate Bank
- MicroStrategy and USDT issuer Tether have distanced themselves from popular fintech firm Silvergate Bank due to bankruptcy concerns.
- MicroStrategy also noted that the collateral for its $200 million loan with the bank is not custodied by Silvergate.
- Silvergate stated that it would postpone the filing of its annual 10-K financial report, igniting rumours of a bankruptcy filing.
- Companies like Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos have stated that they will scale back their relationship with Silvergate.
- The stock of Silvergate Bank has declined by more than 45% in the last 24 hours amid a surge in selling pressure.
Silvergate Bank, a popular crypto bank whose Exchange Network claims to have processed over $1 trillion in transactions since 2017, has found itself in significant trouble recently as many crypto firms are gradually distancing themselves from the fintech firm. The most recent announcements came from MicroStrategy, a company known for its pro-Bitcoin (BTC) approach, and the issuer of USDT, the largest stablecoin by market capitalization, Tether.
MicroStrategy and Tether, both companies, have stated publicly that they do not have any meaningful exposure to the troubled bank. This announcement from the crypto companies comes after Silvergate Bank confirmed that it would postpone the filing of its annual 10-K financial report. This led to the crypto sector fearing the collapse of Silvergate and the impending filing of a bankruptcy.
Silvergate stated in a filing with the United States Securities and Exchange Commission (SEC) that it requires additional time to “perform analysis, record journal entries related to subsequent events and to complete management’s evaluation of internal controls over financial reporting.”
The fintech firm added that it needs more time “to allow its independent registered public accounting firm to complete certain audit procedures, including the review of adjustments not yet recorded and the evaluation of the effectiveness of the Company’s internal control over financial reporting.”
On the other hand, following this filing from Silvergate, MicroStrategy posted on the social media platform Twitter that the collateral for its loan with the bank is not custodied by Silvergate.
Under the leadership of its former CEO, Michael Saylor, MicroStrategy took a loan from Silvergate, using its Bitcoin holdings as collateral. The company confirmed in the Twitter post that it is not obliged to pay the money back until Q1 2025, adding that a bankruptcy or insolvency event wouldn’t “accelerate” the loan repayment.
Furthermore, Tether also distanced itself from Silvergate, as the chief technology officer of the firm, Paolo Ardoino, confirmed in a Twitter post on March 2 that his company has no exposure to the fintech firm, which is known for providing financial infrastructure solutions and services to some of the largest crypto exchanges, institutional investors, and mining companies around the globe.
Silvergate also provided services like a stablecoin infrastructure platform, digital asset custody management, and collateralized lending services to several institutional players in the crypto industry. However, following the fears of bankruptcy entering the crypto market, companies like Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos stated that they would scale back their relationship with Silvergate.
Crypto exchange Gemini also stated that it has stopped accepting customer deposits and processing withdrawals through Silvergate ACH and wire transfers. Other companies that scaled back on their relations with Silvergate include Crypto.com, Blockchain.com, Wintermute, GSR, and Cboe Digital.
It is important to note that the first time the concerns regarding Silvergate rose was during the Q4 2022 filing, when the company confirmed around $1 billion in losses. Interestingly, the company had collaborated with bankrupt crypto exchange FTX and its sister trading company, Alameda Research.
The stock of Silvergate Bank has declined by more than 45% in the last 24 hours amid a surge in selling pressure and increased speculation from investors.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
