California-based leading financial institution for innovators in the cryptocurrency industry, Silvergate Capital Corp., has recently partnered with Coinbase Custody to provide secure storage for its SEN Leverage product, according to an official announcement today.
The product, which was launched last year, initially allowed Silvergate customers to obtain USD loans collateralized by bitcoin (BTC) held on selected cryptocurrency exchanges that are also clients of the bank.
However, under the new partnership, all collateralized bitcoin will be held in Coinbase Custody’s cold wallet, as opposed to using multiple exchanges.
Commenting on the development, Jon Melton, director of digital asset lending at Silvergate, said that the lending product was developed as a result of the unavailability of traditional lending services in the crypto space.
The unavailability of traditional lenders has made it difficult for investors to take advantage of market opportunities, as there are few digital lenders currently available in the market.
Melton continued that he hopes Silvergate’s partnership with Coinbase will provide greater capital efficiency for an institutional investor, thus enabling them to take advantage of unending crypto market opportunities.
“In addition to having access to traditional USD financing, SEN Leverage is even more valuable to our customers because we can provide a first-rate custody experience through Coinbase Custody,” said Melton.
Silvergate Lending Product
Silvergate first announced its plans to dive deeper into the cryptocurrency space in late 2019, by providing institutional clients access to crypto-backed loans.
The loans were collateralized equally with cryptocurrencies, basically as part of Silvergate Exchange Network (SEN).
At the time, the bank noted that the initiative was necessary to grant institutional investors more market opportunities without having to move liquidity on and off exchanges.
The bank made SEN Leverage a full product offering in Q4 2020, with the minimum loan amount pegged at $5 million with an initial 12-month term, subject to credit approval.
Furthermore, the loan is also subject to renewal at the end of its term with a daily calculated interest.
During the early stages of the product, Silvergate saw a surge in loan volume from $35.5 million recorded in Q3 2020 to $85 million in Q4, and the product has continued to gain momentum.
