MicroStrategy offloads Silvergate debt, buys more bitcoin

Enterprise software developer MicroStrategy has repaid a $205 million loan to collapsed crypto bank Silvergate Bank.

The Tysons Corner, Virginia, company voluntarily repaid $205 million in debt with a 22% discount after the crypto bank filed for voluntary liquidation earlier this year.

MicroStrategy president confirms 22% discount on Silvergate loans

The loan was collateralized by bitcoin held by MicroStrategy subsidiary MacroStrategy and $1.5 million in cash at the affiliated firm held at Silvergate Bank, according to a filing with the US Securities and Exchange Commission.

After a 22% discount, the firm repaid $161 million before the loan expires in March 2025. The filing did not disclose what would happen to the 34,619 bitcoins used as collateral under the loan agreement.

In addition to the debt repayment, the 8-K filing revealed that MicroStrategy added 6,455 bitcoin to its balance sheet, which brings its corporate bitcoin holdings to 138,995.

MicroStrategy is the largest corporate holder of bitcoin, having previously acquired 2,395 bitcoin between November 2, 2022 and December 21, 2022.

The firm also plans to use 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 DC Office of the Attorney General has charged Michael Saylor with tax evasion while allegedly living in DC and keeping yachts docked on two regional waterways.

US banks scramble to replicate Silvergate network function

MicroStrategy’s debt repayment comes after Silvergate entered voluntary liquidation earlier this month.

Silvergate, once the darling of the booming crypto boutique industry, was staggered by a crisis of confidence stemming from the collapse of FTX in November 2022. A massive exodus of deposits forced the bank to sell securities at huge losses to meet the liquidity crunch.

The New York State Department of Financial Services appointed Federal Deposit Insurance Corporation as the receiver of New York-based Signature Bank on March 12, 2023 after depositors fled the bank over the number of uninsured deposits it held and its exposure to the crypto sector.

Silvergate and Signature Bank operate two payment rails, the Silvergate Exchange Network (SEN) and the Signet Payments Network. These networks enable crypto traders to convert between fiat and crypto any day of the week.

With both crypto banks being subjected, many regional banks are keen to embrace the industry in order to prevent flight of capital to foreign markets.

New institutions such as Customers Bancorp in Pennsylvania, Cincinnati-based Fifth Third Bancorp and Cross River are trying to keep crypto stateside.

Following the closure of Signature Bank, Circle transferred a percentage of its USDC stablecoin reserves to Cross River.

The clients and Western Alliance Bancorp of Arizona are reportedly developing the Signet and SEN alternatives, sources told The Wall Street Journal. Clients Bancorp offers B2B settlement using its CBIT token on a private blockchain.

Florida-based Surety Bank counts several crypto ATM operators as customers, which collectively account for 5% of the institution’s revenue.

Despite banks’ eagerness to retain businesses in the US, Capital Union in the Bahamas, where Tether reportedly backed its USDT stablecoin, has also drawn interest from crypto firms.

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BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.

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