Silvergate Bank, a US-based crypto-friendly lender, is considering to get more involved with digital assets as it plans to offer fiat loans to institutional clients with crypto as collateral.
According to an updated S1/A form filed with the United States Securities and Exchange Commission (SEC) on August 15, the bank is planning to offer its lending service under the Silvergate Exchange Network (SEN), an existing payment system for the bank’s major clients including crypto exchanges.
“This solution provides greater capital efficiency for institutional investor clients that wish to transact without needing to move liquidity on and off different exchanges,” the filing with the regulator stated.
“Offering lines of credit would also improve liquidity within the order book of our exchange clients, enabling additional trading on their platforms, potentially reducing pricing arbitrage across exchanges and improving the stability of digital currencies.”
The California-headquartered bank is one of the most crypto-friendly banks catering to a series of digital asset companies including Coinbase, Bitstamp, Genesis Trading, Blocktower Capital, Polychain Capital, and Xapo.
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The bank detailed that the proposed loans would be funded from its balance sheet and in case of a default, the bank would have the option to approach any of its exchange clients to sell the assets.
Increasing demand for banking services in the crypto sector
Apart from its plans to expand crypto services, the bank revealed that it recorded a significant increase in its client base this year. As of June 30, the bank had 655 clients from the digital asset industry, whereas the number was only 542 by the end of last year. The bank is also in the process of onboarding another 228 clients, according to the SEC filing.
Earlier this year, Finance Magnates reported that the revenue of Silvergate Bank went down drastically by the end of last year. However, the recent filings show that its business is going upward with the rise of crypto prices again.
The bank’s net income went up from $8 million to $14.6 million since last June – an uptick of 81.6 percent. In 2019, the bank also recorded SEN transfers worth $12.7 billion by crypto customers, while for the non-crypto customers, the figure capped at $11.2 billion.
“We believe there may be attractive opportunities to provide digital currency borrowing facilities to deepen our high-quality customer relationships and further enhance our interest income,” the bank stated.