BlackRock bets on crypto bank Silvergate despite drastic fall

abdelaziz Fathi

BlackRock, the world’s largest asset manager, has increased its stake in Silvergate Bank, a crypto-friendly lender that counts major crypto exchanges like Coinbase and Kraken as clients.

BlackRock

According to a filing with the United States Securities and Exchange Commission (SEC), BlackRock increased its holding in Silvergate Capital to 7.2%, up from roughly 5.9% a year earlier.

Following the news, shares of Silvergate rose by nearly 10% ending the trading session at $14.42 levels. Such a massive boost in BlackRock’s stake apparently boosts investors’ confidence in the bank that has been struggling in the aftermath of FTX collapse.

Despite the recent gains, Silvergate share is still down nearly 20% year to date. They are also off by about 87% when weighed against the peak it hit near $220 in 2022. A massive sale occurred earlier this month after the local three-branch lender reported a decrease in deposits and announced a delay for a major stablecoin project.

Adding to its pain, Silvergate’s payment network, which allows crypto exchanges and other clients to instantly transfer funds, saw its activity fall by 41% in the quarter. The California-based company has grown its deposits from less than $1 billion in 2013 to over $13 billion, largely through providing banking services to crypto companies.

Silvergate, which is trading under the ticker (NYSE: $SI), also allows its customers to obtain US dollar loans collateralized by their bitcoin holdings at some crypto exchanges that it serves.

Despite the crypto winter, BlackRock has been increasing its exposure to digital assets space and blockchain technology. The asset manager made headlines in January after it added bitcoin as an eligible investment to its flagship Global Allocation Fund, which is one of the most preferred vehicles for ordinary and passive investors.

A company filing shows that the move enables BlackRock to allocate part of the fund’s $15 billion to cash-settled bitcoin futures traded on commodity exchanges registered with the CFTC. In December, the New York-based financial conglomerate announced the launch of its crypto ETF in Europe despite the regulatory concerns in the continent.

BlackRock also participated in a $400 million funding round for Boston-based fintech startup Circle. In addition to its investment and role as a primary asset manager of USDC cash reserves, BlackRock entered into a partnership with Circle to explore capital market applications for its stablecoin.

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