California state-chartered Silvergate Bank has announced today the launch of a new product in collaboration with Luxembourg-based crypto exchange Bitstamp.
The new product, called the SEN Leverage, was created by Silvergate in order to provide its customers with the opportunity to obtain U.S. dollar loans collateralized by Bitcoin (BTC) with leverage provided by the Silvergate Exchange Network (SEN) platform.
According to a press release, the product will use the platform to fund loans and process repayments in real-time, with deposits and withdrawal of U.S. dollars available around the clock. Notably, the bank will first roll out a pilot version of the product which will be offered only to some selected institutional clients.
First established in 2017, the Bank’s API-based SEN has seen rapid adoption with over $10 billion in USD transactions taking place during just the third quarter of 2019 alone. In addition to that, the network has also attracted a series of big-name exchanges, including Kraken in November and Gemini in August.
On the other side of this launch partnership is Bitstamp Ltd., a major digital currency exchange founded in 2011. As stated in the announcement, Bitstamp’s role as Silvergate’s first partner will be to provide custody services and manage the Bitcoins used as collateral. The exchanhe has previously worked with the bank during SEN Leverage’s development phase.
Currently, Bitstamp actively supports five cryptocurrencies for trading (BTC, ETH, LTC, XRP, BCH) and saw an average daily trading volume of around $113 million in 2019.
Upon the announcement, Miha Grcar, Head of Business Development at Bitstamp stated:
“We see growing demand from our institutional customers to access greater trading capital. […] We already use SEN to enable withdrawals and deposits to Bitstamp accounts within minutes at any time and look forward to offering our clients additional flexibility to manage their bitcoin positions through SEN Leverage.”
On the other hand, Alan Lane, Chief Executive Officer of Silvergate explained in his statement that this new product came to be as their digital currency customers have asked the institution to help them create greater capital efficiency.
He further said that “we are excited to be working closely with Bitstamp to solve this problem for them. The integration and work that our collective teams have put into this over the past six months is a testament to the conviction we have to serve our customers.”
Silvergate’s existing presence in the crypto space is significant, based on the number of industry clients it maintains. Founded in 1988, Silvergate has changed its business models over the years in order to accommodate the ever changing industry.
Most recently, it has switched its focus towards crypto businesses by providing banking services to the crypto firms, and therefore filling the gap between the hostile banking sector and the digital asset industry.
Silvergate revealed that it is providing banking services to 756 crypto clients till last September, according to a filing with the U.S. Securities and Exchange Commission (SEC) last year. Furthermore, it also tapped major clients including Coinbase, Bitstamp, Genesis Trading, Blocktower Capital, Polychain Capital, and Xapo.