Microstrategy, a publicly listed business intelligence firm has now joined a long list of crypto firms distancing themselves from crypto-based Silvergate Bank as the latter’s valuation continues to tumble.
According to the announcement, Microstrategy does not have any significant exposure to Silvergate aside from a commitment to repay a loan it had acquired earlier. Furthermore, the largest institutional Bitcoin (BTC) holder assured users that none of its BTC holdings is held by the crypto bank as collateral.
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
Microstrategy now holds approximately 132,500 BTC units after investing $41 million in its last acquisition.
Additionally, Microstrategy says its loan obligation to the crypto bank is not due until the first quarter of 2025. The firm said that even though Silvergate is currently battling a liquidity crisis and might likely go bankrupt, current situations at the bank will not accelerate its repayment schedule.
Recall that yesterday, Silvergate requested for additional two weeks as it said that it would not make the March 16 deadline to file its annual financial report otherwise known as 10-k filing with US regulators. There is also a chance the firm will record more debts in the coming months after it sold additional securities in January and February. Undoubtedly all of these factors are impacting the firm’s day-to-day operations.
Other Crypto Firms Sever ties with Silvergate
News of its planned delay in making its 10-k filing – a document that is required by regulators to access and understand a business health status in terms of finance, sparked a series of chain reactions from other crypto firms in the industry.
For instance, American cryptocurrency exchange Coinbase dropped Silvergate as its USD banking partner and asked users to immediately update their payment instructions to Signature Bank, a rival platform.
[DB] Coinbase Drops Silvergate as USD Banking Partner for Prime Customers, Moving to Signature: Memo
— db (@tier10k) March 2, 2023
Similarly, Gemini alerted its users that while it is still monitoring the situation at Silvergate, it has stopped accepting deposits and processing withdrawals through the California bank adding that no customer funds are held in the bank.
Paolo Ardoino, the Chief Technology Officer of Tether Holdings, the issuer of USDT, a stablecoin pegged to the US dollar, also shared a tweet affirming that Tether has no relationship with Silvergate.
#Tether does not have any exposure to Silvergate.
— Paolo Ardoino 🍐 (@paoloardoino) March 2, 2023
Other players who have also reduced their level of exposure or totally cut off ties with the embattled crypto bank include Circle, Bitstamp, and Crypto.com amongst many others. It is evident that all of these reactions are to prevent another FTX-like episode.
