The digital currency space has received a significant boost after one of the biggest financial infrastructure solution providers, Silvergate Capital Corporation, announced that it will introduce a new lending product service. Institutional investors and corporate firms will soon have an opportunity to access collateral-based U.S dollar loans through Silvergate Corporate. The Corporate is the holding company of pro-crypto institution Silvergate Bank.
On March 23, when unveiling the product service Director of digital assets lending Jon Melton highlighted:
“Traditional lending services generally do not exist in the digital currency industry, which means there aren’t many lenders for investors to choose from.”
According to an announcement from Silvergate, Coinbase Custody will facilitate custodial service for loans funded via the bank’s Silvergate Exchange Network, SEN. The network will provide extensive access to capital through U.S dollar loans collateralized by Bitcoin (BTC) while Coinbase holds the crypto in cold storage.
Melton further explained:
“Traditional lending services generally do not exist in the digital currency industry, which means there aren’t many lenders for investors to choose from. Our relationship with Coinbase Custody offers institutional investors increased access to capital efficiency so they can take advantage of market opportunities in the digital currency industry.”
Silvergate will now offer Collateral-based loans starting at $5 million with an initial 12-month repayment period. Interestingly, Silvergate is not the only firm set to offer this type of product service. Earlier on, the fiat wallet and exchange app Abra had announced its plans to introduce a service for crypto users to get cash from their holding without necessarily selling, known as Abra Borrow.
Such loans will replace traditional funding rounds for corporate firms aiming to join the crypto space. Silvergate announced its bid to offer a collateral-based loan in 2019. Since then, Silvergate’s annual revenue has more than tripled, from $30 million to $91.5 million.
In that context, the bank has said that since the results are evident, this is the right time for its clients that has a significant impact on the growth of this revenue to be involved in the custody and transfer of digital assets between customers.
Earlier on, in the fourth quarter of 2021, CEO Alan Lane said that the bank had anticipated increased demand for these loans in 2021. Though the number of digital currency deposits grew by $2.9 billion over the same period, the price of Silvergate Capital Corporation stock has been volatile in the first quarter of 2021.
It reached an all-time high of $176.27 on February 16 but plummets 40% within three weeks. At the time of publication, NYSE: SI value hovers at $148.90.