Crypto-friendly Silvergate Bank spend cash from the initial public offering this month to expand its offerings, anticipating higher price volatility cryptocurrency will fuel the increase in trade volume and deposit.
In an interview, CEO Alan Lane said Silvergate IPO provide fresh capital for new products to meet the increasing demand from institutions for full cryptocurrency loan and deposit solutions.
Lane said that the greater price volatility could bring more price differences and profit opportunities for crypto market. That would lead traders to increase dollar deposits with Silvergate.
“We do not predict when it will happen, but we know that there may be additional period where volatility drives up the volume, and want to make sure that we can help our customers when it happened,” he said.
One potential catalyst could be a bitcoin reward blocks get cut in half in the next year, Lane said, with the idea that the decline in new supply could push up the price. Other events may include regulatory approval exchange-traded funds for crypto, which made the fork hard currency such as bitcoin new breakaway cash, or high-profile hacks of exchange crypto affecting sentiment.
“In our experience, it is not so much about the absolute price of an asset, but volatility in the price of where we really see the potential for changes in the behavior of some of our customers,” said Lane.
Expanding the product line
The California-based commercial bank plans to launch the product in the fourth quarter cryptocurrency loans and settlement and custody services for fiat currencies and digital assets by June 2020 at the latest.
Two of the largest generator of profit the transaction costs of trade and investment yields that make use of client deposits, Lane said, with the offset fresh capital investment in new products for the region.
New loan products, planned to be launched in the fourth quarter of 2019, will be part of Silvergate Exchange Network (SEN) – a payment system that is designed to exchange their crypto and large clients to transfer funds within the network.
This will allow clients to borrow from a bank fiat currencies using bitcoin holdings as collateral, according to Lane.
the bank decided to add a settlement and custody services within six months after the launch of loan products due to the increasing demand of its client base, he said.
“We’ve been working with the New York DFS, and apply them to establish a New York licensed trust company for settlement and custody services,” said Lane. New York trust company-leased at market crypto including Coinbase, Gemini, Paxos, Bakkt and Fidelity Digital Asset Services.
Overall, Silvergate is among a very short list of US financial institutions whose banking institutions crypto. They include Metropolitan Commercial Bank, Signature Bank, and Cross River Bank.
Silvergate client is about 60 percent of US and 40 percent of international entities, Lane said.
Silvergate Bank was established as a traditional commercial bank in Southern California in 1988, but started spinning in 2013 to serve the exchange of crypto, startups and institutional investors.
Lane said that the decision to enter the market crypto simple: “Our loans growing faster than deposits, we just look for another source of deposits.”
He said that currently the balance sheet is still enough to support a customer’s loan volume over the crypto.
bank deposits doubled in 2017 and more than tripled client base since it started banking business related to crypto, according to the IPO filing.
Before the IPO, Silvergate has raised $ 114 million through a private placement in February 2018. Nine months later, agreeing to sell its Silvergate San Marcos, CA, branch retail and business lending team for the Seattle-based HomeStreet commercial banks.
Sales, completed in March 2019, including the reduction of $ 115.4 million in loans and $ 74.5 million in deposits, but making a profit before tax of $ 5.5 million, according to the IPO filing.
Lane said the deal was part of the bank’s efforts to shift more toward crypto its business, as well as pay for investments to improve the side.
“We basically bring the banking system legacy operating only 40 hours a week during business hours to 24/7 crypto market that never sleeps,” he said.
Silvergate Bank listed its shares on the New York Stock Exchange under the trading symbol SI, through a $ 40 million initial public offering on November 7
Bank completed the IPO on November 12, raising approximately $ 10 million from the issuance of common stock 824 605, while the existing shareholders reaped $ 30 million from the sale of 2.5 million shares them.
The shareholders, which include Bankcap Partners, a Dallas, TX, a private equity firm based and Park West Asset Management, may exercise a greenshoe option to sell up to 499 999 additional shares in November, according to the IPO filing.
Silvergate Bank shares debut at $ 12 on the NYSE and traded at $ 16.35 on Wednesday, valuing the company at $ 319 million.
“We know that the last time there was a big bull market in crypto, our deposits increased and that it’s part of the reason to go public, in case we have another big growth spurt and we need capital,” said Lane. “Now we’re the public, we have more efficient access to capital to support our growth.”
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