In 2013, the CEO of Silvergate, Alan Lane, bought his first Bitcoins. This was around the same time the bank started servicing its first cryptocurrency exchange. This was a rather bold move at a time when most financial institutions considered Bitcoin and the entire industry as a high risk investment or scam. Some other financial institutions didn’t even know what BTC was at this time. This was how the story of how Silvergate became the leading bank for cryptocurrency exchanges started.
The Leading Bank For Cryptocurrency Startups – Silvergate
On Friday, during the BlockFS conference that was hosted in New York, Lane talked about how his banks interest in cryptocurrencies started. In his words:
“In a place where there are many companies raising money from VC firms, there isn’t any illegal thing going on but exchanges still had difficulties maintaining bank accounts. This is why I gave them the opportunity to bank with us while fulfilling our need for deposits.”
Today, Silvergate is the leading bank for cryptocurrency startups within the United States. The bank renders services to big time clients like Gemini, CoinBase, BitFlyer, Kraken and so many other exchanges. According to an initial public offering prospectus the bank filed recently, it now serves up to 483 cryptocurrency startups. It had deposits of up to $1.7 Billion in its Q3 balance sheet.
During a panel meeting on banking startups, Lane said that Silvergate fixed a sit down between exchange executives and its regulators to discuss how they can overcome the crypto-phobia that has prevented many banks from servicing exchanges and other cryptocurrency startups. According to him, his bank only offered services to startups that meet up with legal and professional expertise and were dedicated to meeting up with compliance.
One of the reasons why banks and regulators are not fund of cryptocurrency startups is that most of them have a habit of juggling executive duties. Lane made it clear that the chief compliance officer doesn’t agree with this method.
During the meeting, the director of IT at the Metropolitan Bank of New York, Nick Rosenberg, said that his institution is pursuing a diverse range of cryptocurrency startups aggressively. According to Lane, Silvergate has narrowed its focus over the years to institutional investors, those interested in over the counter trading, and exchanges. Both companies service Coinbase, one of the leading cryptocurrency exchanges in the world. Regarding their relationship with Coinbase, Lane said:
“Coinbase is most likely the most well-banked company in the cryptocurrency ecosystem. Coinbase banks with us and other banks on purpose.”
According to Lane, this may be a strategy that cryptocurrency startups used during the infant days of the industry. Most startups banked with several institutions as insurance in case one gets shut down. Silvergate is different from other banks because it integrates the APIs of exchanges so that its institutional investors can instantly trade even when the bank is closed.
The bank typically requires that its clients use the assets of external auditors like stablecoins like the Gemini dollar and USDT. Coinbase and Gemini launched their stablecoins this year to match fiat deposits.
