Silvergate Capital Corporation is joining hands with Coinbase Custody – a division of the popular American cryptocurrency trading platform – to provide crypto loan services to its growing list of eligible customers. Coinbase Custody Is Paired with SEN Leverage Coinbase will largely be tasked with overseeing capital through Silvergate’s division SEN Leverage, which provides U.S. dollar loans that are “collateralized” by bitcoin. In other words, while the loans are delivered in USD, they are backed by bitcoin, meaning that the world’s number one digital currency by market jumps in to save the day should a loan applicant blunder in any way. Here’s a standard scenario: someone looking for funds or a loan of some kind approaches Silvergate, which then refers the person to
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Silvergate Capital Corporation is joining hands with Coinbase Custody – a division of the popular American cryptocurrency trading platform – to provide crypto loan services to its growing list of eligible customers.
Coinbase Custody Is Paired with SEN Leverage
Coinbase will largely be tasked with overseeing capital through Silvergate’s division SEN Leverage, which provides U.S. dollar loans that are “collateralized” by bitcoin. In other words, while the loans are delivered in USD, they are backed by bitcoin, meaning that the world’s number one digital currency by market jumps in to save the day should a loan applicant blunder in any way.
Here’s a standard scenario: someone looking for funds or a loan of some kind approaches Silvergate, which then refers the person to its SEN Leverage division. The person garners funding in USD for a specific amount (let’s say $5,000), and the same amount of BTC is stored in a Coinbase Custody account, which is kept aside to assist should the loan payments fall short at some point.
Jon Melton – director of digital asset lending with Silvergate – explained in a recent interview:
Traditional lending services generally do not exist in the digital currency industry, which means there aren’t may lenders for investors to choose from. Our relationship with Coinbase Custody offers institutional investors increased access to capital efficiency so they can take advantage of market opportunities in the digital currency industry… 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.
SEN Leverage is not for those looking for a few quick funds here and there. As it turns out, loans with the program typically start off at $5 million and must be paid back within a one-year period. Granted a person is unable to do so, they must sign a new agreement that charges interest monthly.
Sam McIngvale – chief executive officer of Coinbase Custody – expressed his excitement over working with Silvergate and mentions:
We’re thrilled to have been selected by Silvergate to expand their industry-leading SEN Leverage product. As one of the global leaders in the custody of digital assets, we feel this is a relationship of equals and we’re happy to help Silvergate work toward their goal of maximizing capital efficiency for this rapidly growing industry.
A New Way of Looking at Money
While Silvergate has been around for some time, SEN Leverage is still a relatively new division, having first come about as a full product offering during the final months of last year. Between the last two quarters of 2020, lending increased by about $50 million, suggesting that crypto banking is becoming a far more popular alternative to traditional offerings.
Coinbase Custody currently operates under New York-based banking laws and stands as one of the most qualified custodial firms available today.