MicroStrategy says its BTC collateral is not custodied with troubled Silvergate

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Key Takeaways

  • MSTR adds that it will not have to pay back a loan from Silvergate until Q1 2025 and that bankruptcy wouldn’t accelerate the loan repayment.
  • Tether CTO states his company has no exposure to Silvergate.

Business software company MicroStrategy(MSTR) states that it had no asset with crypto-focused bank Silveragte Cpiatl (SI). “Our bitcoin (BTC) collateral isn’t custodied with Silvergate and we have no other financial relationship with Silvergate”, the Michael Saylor-founded firm’s official tweet reads

MSTR’s official statement comes amid Silveragte delaying the filing of its annual 10-K report triggering liquidity concerns. Shares of the crypto bank’s stock have already fallen over 55% in the last 24 hours.

The firm added that it will not have to pay back a loan from Silvergate until Q1 2025 and that bankruptcy or insolvency wouldn’t necessarily “accelerate” the loan repayment. Apart from MSTR, several other companies across the digital asset sector are also trying to distance itself from the bank. On March 2, Tether’s Chief Technology Officer Paolo Ardoino said his company has no exposure to Silvergate.

Crypto exchange Coinbase also announced that it would no longer accept or initiate payments with Silvergate. Stablecoin issuers Paxos and Circle and Mike Novogratz’s Galaxy Digital have also decided to scale back their partnership with the digital asset bank.

Firms ending the partnership with Silvergate has put the bank in a much more dire state. The bank’s liquidity troubles spiked after the implosion of Sam Bankman Fried’s FTX in November. Silvergate is also now being probed by the United States Department of Justice which is investigating Silvergate’s hosting of accounts linked to former FTX CEO Sam Bankman-Fried’s businesses.

The bank also reported a net loss of $1 billion in the fourth quarter, after investors concerned by the collapse of FTX pulled out more than $8 billion in deposits in the last three months of 2022.

Silvergate had cut 40% of its staff and disclosed taking out billions of dollars in loans to prevent a liquidity crisis and bank run following the fall of the SBF empire. In late January, when suspending its dividends, the bank had claimed that it had a “cash position in excess of its digital asset customer-related deposits,” at the time.

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Saniya Raahath
Saniya Raahath

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