Crypto-backed loans could soon bring new investors into space

Institutional investors will soon be able to obtain Bitcoin-backed US dollar loans through Silvergate Capital Corporation – the holding company of the pro-crypto institution Silvergate Bank.

According to an announcement from Silvergate, Coinbase Custody will be the custodian for loans funded through the bank’s Silvergate Exchange Network (SEN). The network will provide access to capital through Bitcoin (BTC) backed US dollar loans, while Coinbase will keep the crypto in the cold store.

“Traditional lending services generally don’t exist in the digital currency industry, which means investors don’t have many lenders to choose from,” said Jon Melton, Silvergate director of digital asset lending. “Our relationship with Coinbase Custody gives institutional investors better access to capital efficiency so they can capitalize on market opportunities in the digital currency industry.”

Silvergate will offer loans starting at $ 5 million with an initial term of 12 months. Such loans could complement or replace traditional rounds of funding for companies looking to enter the crypto space.

Silvergate’s annual revenue has more than tripled from $ 30 million to $ 91.5 million since it was first announced in 2019 that it was considering its crypto-backed loan offering. The bank said at the time that its customers had a keen interest in Silvergate “being involved in the custody and transfer of digital assets between customers.”

In the fourth quarter of 2020, CEO Alan Lane said the bank expected “increased demand” for these loans in 2021. Although the number of digital currency deposits increased by $ 2.9 billion over the same period, the price of shares in Silvergate Capital Corporation was volatile in the first quarter of 2021, hitting an all-time high of 176.27 on February 16 USD but fell 40% in three weeks. At the time of publication, NYSE: SI is valued at $ 148.90.