business intelligence company MicroStrategy and stablecoin issuer Tether have become the latest two companies to publicly deny any significant exposure to Silvergate Bank.
The news comes after Silvergate announced on March 1 that it would postpone filing its annual 10-K financial report, which has made many fear that the cryptocurrency bank may be on the verge of bankruptcy.
This prompted MicroStrategy – which owns more than 130,000 Bitcoin (BTC) – to confirm that its BTC collateral is not escrowed with Silvergate.
The company founded by Michael Saylor added that you will not have to repay a Silvergate loan until the first quarter of 2025 and that a bankruptcy or insolvency would not “expedite” the repayment of the loan.
We have a loan from Silvergate not due until Q1 ’25. There are mkt concerns re SI’s end. 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
We have a loan from Silvergate that doesn’t mature until the first quarter of 2005. The market is concerned about SI’s financial condition. For anyone wondering, the loan would not be accelerated by SI insolvency or bankruptcy. Our BTC collateral is not escrowed with SI and we have no other financial relationship with SI.
Paolo Ardoino, Tether’s CTO, confirmed in a March 2 tweet that Tether is also not exposed to Silvergate.
#tether does not have any exposure to Silvergate.
— Paolo Ardoino (@paoloardoino) March 2, 2023
#Tether does not have any exposure to Silvergate.
The collapse of the cryptocurrency bank could prove costly for the rest of the sector.
Silvergate is a financial technology company 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 payment platform, called the Silvergate Exchange Network, which has reportedly processed more than $1 trillion in transactions since 2017.
The firm also provides a stablecoin infrastructure platform, digital asset custody management, and collateralized lending services. to various institutional players in the cryptocurrency industry.
Despite large network effects, the late filing of the 10-K appears to have had a consequential effect on their associations.
Within 24 hours of the late filing of the 10-K, Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos all confirmed that they would reduce their partnerships with the cryptocurrency bank to some extent.
gemini too advertisement that it has stopped accepting customer deposits and processing withdrawals through Silvergate ACH and wire transfers.
Others that have apparently cut or reduced ties include Crypto.com, Blockchain.com, Wintermute, GSR and Cboe Digital, according to reports.
For his part, a spokesperson for the crypto exchange Binance confirmed to Cointelegraph that Binance has no association with Silvergate and does not use the crypto bank’s services.
Silvergate failed to file their annual report citing regulatory investigations. Possibly not solvent.
They already lost the majority of their partners. pic.twitter.com/LKdQtNfRRe
— Quinten | 048.eth (@QuintenFrancois) March 2, 2023
Silvergate did not file its annual report citing regulatory investigations. It may not be solvent. They have already lost most of their partners.
Concerns about Silvergate’s potential financial problems first arose in Q4 2022, when it reported a $1 billion net loss. as a result of the surprising FTX collapse in November.
The exact relationships between Silvergate and FTX have recently been the subject of an investigation by the US Department of Justice, although for the moment there has been no accusation of irregularity.
Plaintiffs in a recently proposed class action lawsuit against FTX on February 14 accused Silvergate of “aiding and abetting” a “multi-million dollar fraudulent scheme” that was orchestrated by former FTX CEO Sam Bankman-Fried.
Despite many companies recently claiming no exposure to Silvergate, the bank processed more than $3.8 billion in customer deposits in the fourth quarter of 2022. This was a sharp drop from $11.9 billion in the third quarter of 2022, according to Silvergate.
Since the news of the late 10-K filing on March 1, Silvergate’s share price has fallen a whopping 58.7% to $5.57. Stocks have lost more than 97% from their all-time high of $219.7, reached on November 14, 2021.
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