Silvergate dismisses speculation of trouble, says BlockFi exposure is minimal
Crypto-friendly bank Silvergate Capital claimed on a Tuesday blog post that it had minimal exposure to crypto lender BlockFi, which filed for chapter 11 bankruptcy protection this week.
Silvergate revealed that it held roughly $20 million worth of cash or its equivalent – less than 0.1% of its digital asset customers – on BlockFi. That compares to $13.2 billion in total crypto-related deposits, according to the firm’s Q3 revenue report.
Apart from that, Silvergate CEO Alan Lane reassured clients that they don’t have equity into BlockFi and never used its platform as a custodian for its Bitcoin collateralized leverage loans, which haven’t faced any loss or forced liquidations to date.
“As the digital asset industry continues to transform, I want to reiterate that Silvergate’s platform was purpose-built to manage stress and volatility. The SEN continues to operate as designed, and our support teams are available 24 hours a day, seven days a week to help our customers during this period of adversity,” he added.
Lane continued that he expects a tough crypto winter, but Silvergate isn’t going anywhere, pointing out that fund flows with crypto exchanges are a necessary part of the business.
The statement further states that the US-listed bank has been getting a lot of heat from investors and the general public alike lately and has been under a lot of FUD (fear, uncertainty, and doubt), with a whole lot of tweets adding to the fire over the last week. However, most of them seem to be bogus, it added.
Silvergate, which is trading under the ticker (NYSE: $SI), allows its customers to obtain US dollar loans collateralized by their bitcoin holdings at some crypto exchanges that Silvergate is currently serving.
In the absence of major institutional attention, Silvergate Bank provides tailored financial services to businesses that are directly or indirectly dealing with cryptocurrency and blockchain-related services.
BlockFi filed for bankruptcy protection Monday after weeks of speculation about its solvency after it paused withdrawals earlier in November. The lender had been relying on a $400 million line of credit from crypto exchange FTX, which itself filed for bankruptcy protection two weeks ago.
Approximately eight additional affiliated companies are part of the proceedings, including its Bermuda subsidiary. In the bankruptcy filing, BlockFi indicates it has more than 100,000 creditors, with liabilities in the range of $1 billion to $10 billion. The company has $257 million in cash on hand, which it says will provide sufficient liquidity to support operations during the restructuring process.
