Enterprise software developer MicroStrategy has paid off a $205 million loan to collapsed crypto bank Silvergate Bank.
The Tyson’s Corner, Virginia, company voluntarily paid off a $205 million loan with a 22% discount after the crypto bank voluntarily filed for liquidation earlier this year.
MicroStrategy Chairman Confirms 22% Discount on Silvergate Loan
According to a filing with the U.S. Securities and Exchange Commission, the loan was collateralized by Bitcoin held by MicroStrategy’s subsidiary MacroStrategy and $1.5 million in cash the affiliate firm held at Silvergate Bank.
After the 22% discount, the firm repaid $161 million before the loan’s term expires in March 2025. The filing does not disclose what would happen to the 34,619 Bitcoin used as collateral under the Loan agreement.
In addition to the loan repayment, the 8-K filing disclosed that MicroStrategy added 6,455 Bitcoin to its balance sheet, which takes its corporate Bitcoin holdings to 138,995.
MicroStrategy is the largest corporate holder of Bitcoin, having previously acquired 2,395 Bitcoin between Nov. 2, 2022, and Dec. 21, 2022.
The firm also plans to harness Bitcoin’s micropayment Lightning Network through enterprise software initiatives.
A District of Columbia judge recently denied a motion to dismiss tax evasion charges against MicroStrategy’s Executive Chairman, Michael Saylor. The D.C. Office of the Attorney General has accused Michael Saylor of tax evasion while allegedly living in D.C. and keeping yachts docked at two regional waterfronts.
US Banks Scramble to Replicate Silvergate Network Function
MicroStrategy’s loan repayment comes after Silvergate entered into voluntary liquidation earlier this month.
Once the darling of the burgeoning crypto boutique industry, Silvergate was stung by a confidence crisis stemming from the collapse of FTX in Nov. 2022. A mass exodus of deposits forced the bank to sell securities at steep losses to cover liquidity shortfalls.
The New York State Department of Financial Services appointed the Federal Deposit Insurance as receiver of New York-based Signature Bank on March 12, 2023, after depositors concerned with the number of uninsured deposits the bank held and its exposure to the crypto sector fled.
Silvergate and Signature Bank operated two payment rails, the Silvergate Exchange Network (SEN) and Signet Payments Network. These networks enabled crypto traders to convert between fiat and crypto any day of the week.
With both crypto banks going under, several regional banks are willing to embrace the industry to prevent capital flight to overseas markets.
Customers Bancorp in Pennsylvania, Cincinnati-based Fifth Third Bancorp, and new institutions like Cross River are trying to keep crypto stateside.
Circle moved a percentage of reserves for its USDC stablecoin to Cross River after the closing down of Signature Bank.
Sources told the Wall Street Journal that Customers and Arizona’s Western Alliance Bancorp are reportedly developing Signet and SEN alternatives. Customers Bancorp offers B2B settlements using its CBIT token on a private blockchain.
Florida-based Surety Bank counts several crypto ATM operators as clients, who collectively account for 5% of the institution’s revenue.
Despite the eagerness of banks to keep businesses in the U.S., Capital Union in the Bahamas, where Tether reportedly once held reserves backing its USDT stablecoin, has also received interest from crypto firms.
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