Silvergate provides loans secured by cryptocurrency
MacroStrategy, a subsidiary of MicroStrategy, received a loan from Silvergate Bank. The loan was $205 million and was granted as part of the Leverage initiative, which provides loans where bitcoin is the collateral. According to the deal, the allocated funds were secured by cryptocurrency worth about $820 million. At the same time, MacroStrategy’s stock price remained unchanged.
MicroStrategy is a software maker that has recognized bitcoin as a full-fledged payment instrument. Late last year, as a result of the cryptocurrency’s plunge in value, the company claimed about $150 million in depreciation on its bitcoin holdings. The loan with Silvergate is secured in part by bitcoins held in MacroStrategy’s collateral account. The software maker plans to use the allocated money to purchase cryptocurrency, repay interest on the loan, and pay corporate expenses.
The program of issuing loans secured by cryptocurrency has been in effect at Silvergate Bank since 2019. Representatives of the company explained such a decision as to the growing interest in digital money, as well as the needs of market participants. According to such an initiative, the amount of the loan issued can significantly exceed the figure of collateral in bitcoins. In addition, Silvergate takes part in the exchange of cryptocurrency between its clients. To this end, the SEN network has been expanded to allow for bitcoin transactions at any time of day or night.
By the time Leverage was introduced, the U.S. bank was already actively supporting customers who were making deposits in digital money. By the time the initiative was launched, Silvergate had more than 500 customers who were involved in the cryptocurrency industry in one way or another.
According to 2021, Leverage has more than $570 million in commitments.
According to a MicroStrategy spokesperson, the cooperation with Silvergate will provide an opportunity to strengthen the manufacturer’s position in the cryptocurrency investment sector. The loan allowed the company to transform its bitcoin holdings into an effective tool for implementing its business strategy.
Silvergate currently serves more than 1,380 cryptocurrency customers. The average amount of their deposits is more than $13.3 billion. In turn, revenue from such clients grows every quarter. Last year, this figure increased from $11 million to $35.8 million.
Demand for the bank’s services is growing thanks to its SEN solution, which allows for instant digital currency payments. In addition, Silvergate is actively developing services for Stablecoin issuers and has set up its own venture capital fund, which will also cooperate with companies involved in the cryptocurrency industry.