U.S.-based Silvergate Bank has launched a bitcoin collateralized loan product with Bitstamp as its launch partner. The crypto exchange will act as the bank’s agent to manage and provide custody for bitcoin collateral. The product utilizes Silvergate Bank’s Exchange Network to fund loans and process repayments in real time.
Also read: Regulatory Roundup: EU-Wide Crypto Regulations, New Rules in Europe, US, Asia
Silvergate Bank’s New Product
Silvergate Bank announced on Wednesday that it has launched a new product called SEN Leverage, which uses the Silvergate Exchange Network (SEN) to fund loans and process repayments in real time. Bitstamp, one of the oldest bitcoin exchanges, is the bank’s launch partner. The bank detailed:
SEN Leverage … will allow Silvergate Bank (‘Bank’) customers to obtain U.S. dollar (‘USD’) loans collateralized by bitcoin held at select digital currency exchanges that are also customers of the bank.
Initially, the product will be available to the bank’s institutional clients, with Bitstsamp acting as its agent to manage and provide custody for bitcoin collateral, the announcement describes.
“Our digital currency customers have asked us to help them create greater capital efficiency,” Silvergate CEO Alan Lane commented, adding that both companies worked on the project for the past six months.
Bitcoin-Collateralized Loans
In its filing with the U.S. Securities and Exchange Commission (SEC), Silvergate Bank explained that the borrowers would provide digital currency as collateral “in an amount significantly greater than the line of credit being advanced.” At no time will the bank directly hold the pledged cryptocurrency, and the offer is limited to bitcoin initially.
Silvergate Bank plans to work with existing digital currency exchange clients to act as its collateral custodian for the loans “and to liquidate the collateral in
