Following an unprecedented wave that saw bitcoin approaching $ 65,000, Silvergate Bank, which has major crypto exchanges Bitstamp, Coinbase, Gemini and Kraken as clients, posted a record first quarter.
Led by historic records of digital currency customers, number of transactions, volume and revenue on its 24/7 Silvergate (SEN) exchange network, which is used by customers to fund bank accounts. crypto trading, the bank posted net income of $ 12.7 million. dollars. This figure represents an increase of 39% from its profit for the last quarter and an annual increase of 189%.
Growth of SEN-sational loans
Added to this is the fact that SEN Leverage, a lending product first launched in January 2020 that allows customers to borrow fiat against their bitcoin holdings, has been its fastest growing Silvergate product in the world. last quarter with a total outstanding balance of $ 196.5 million. This advancement is a critical step in meeting the needs of sophisticated clients who are looking for ways to leverage betting in this current market under one roof.
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For Silvergate CEO Alan Lane, who spoke with Forbes exclusively before the publication of the results, the bank is just getting started with its loan products. In particular, he highlighted how his constitution as a bank allows him to tap readily available escrow deposits to fund these loans, rather than having to look outside.
Go all out on crypto
For Lane, the totality of these results is the rationale for a plan the bank implemented when it first saw the potential of bitcoin years ago. He said: “We have focused over the last three or four years on Silvergate’s transition to a cleaner game. [for the crypto industry]. ”
This transition is reflected in Silvergate’s balance sheet. According to the findings report, customer deposits in digital currency (such as exchanges, institutional investors, and other crypto-focused businesses) made up 98% of its total deposit base. In addition, commission income from these clients amounted to 88% of its total non-interest income.
In addition to strong financial results, Silvergate also reaped the benefits of this approach in its trading performance (NYSE: SI). The stock is up 87% year-to-date and 841% in the past 12 months. It beat regional and national banking indices, as well as the S&P 500 in each of these periods.
What happens after
During our conversation, Lane also highlighted some future opportunities that he sees for the bank. In particular, he singled out stablecoins, which continue to experience hyperbolic growth with a total market cap approaching $ 70 billion. However, he does not primarily focus on using stablecoins for trading, claiming that “where we really see the benefits of stablecoins for the wider world is around trade, cross-border payments and remittances “. Lane mentioned that Silvergate is working “feverishly” with a number of potential partners, but was not ready to release the names.
Additionally, although the bank has a crypto-custody offering, Lane said she is focusing more on building a network of custodians so that no matter where a customer holds their bitcoin, they may take out loans against the assets.
Speaking of assets, at present clients can only borrow against bitcoin which is unlikely to change in the near future. However, next on the list could be Ether, Ethereum’s native crypto, provided its planned upgrade to a newer version with higher transaction rates over the next year or two takes place. as expected. Lane said: “In order for us to be comfortable lending against assets, we not only need to feel comfortable holding the asset, but there must also be a large pool of liquidity. Right now, the closest to Bitcoin would be Ethereum. However, right now they are in the process of changing their protocol from proof of work to proof of stake. We certainly want to wait and see how it all goes before we start lending funds to our depositors against a protocol that is undergoing such a major change. ”