The boom in bitcoin prices is giving a huge lift to a California bank that accepts cryptocurrency deposits and doles out bitcoin-backed loans.
Shares of Silvergate Capital are up more than 120% so far this year -— and the stock has skyrocketed nearly 1,300% since going public in November 2019.
Increasingly more financial services firms, such as Bank of New York Mellon, Visa, MasterCard and BlackRock, are starting to embrace bitcoin. But arguably no bank is as “all-in” on crypto as Silvergate.
CNN Business spoke to Silvergate CEO Alan Lane about the bank’s bitcoin business and what he predicts next for the world of crypto.
Silvergate decided to venture into cryptocurrencies after Lane personally invested in bitcoin for the first time in 2013, he said. He realized there was a need for a financial institution that could focus on the “plumbing” of cryptocurrency transactions, taking in deposits and making loans.
Such a bank would have to be able to serve clients at any hour of the day, he said, since bitcoin -— unlike government-backed currencies, stocks, bonds and other financial assets — never stops trading. You can’t have traditional banking hours for a non-tradtiional asset.
“We started with crypto deposit accounts for customers and quickly learned that companies need more help beyond traditional 40-hours-a-week banking,” Lane said. “We needed to build a bank for a 24/7 digital world.”
Silvergate currently has about $5 billion in crypto-backed deposits. But the bank’s biggest selling point for customers is its Silvergate Exchange Network (SEN), which lets clients transfer dollars to digital currency exchanges at any time.
“There is a lot of friction in banking. Wire transfers can be time consuming,” Lane said. “The beauty of SEN is that once a deposit account is open, you can transact with others in seamless method and transfers are instant.”
He noted there is also “more liquidity since the crypto markets are active on nights and weekends while the traditional banking system is closed.”
Customers have responded to that. Silvergate announced in October that it had done more than $100 billion in transfers since it started the SEN in 2017.
Lane said the bank’s customers are primarily institutional investors and other firms doing business in bitcoin and other cryptocurrencies. Customers can’t, as individuals, set up an account at the bank for their bitcoin or other digital assets.
Lending to customers that want to buy more bitcoin
Silvergate’s clients include Coinbase, the bitcoin wallet firm that is planning to go public later this year, and Square, the Jack Dorsey-led payments giant that allows customers to buy and sell bitcoin.
The company has also expanded its lending business to take advantage as more financial firms are looking to invest in bitcoin. The bank launched a product called SEN Leverage last year, which gives investment firms…