This was made public recently through a press release posted by Silver Capital Corporation on August 15 in preparation for its upcoming IPO.
In the announcement, Silvergate stated that “there may be attractive opportunities to provide digital currency borrowing facilities to deepen our high quality customer relationships and further enhance our interest income.”
Silvergate has always been a supporter of crypto firms, banking some of the earliest crypto startups in the cryptocurrency space such as Gemini, Paxos, bitFlyer, and Kraken.
Silvergate is trying to establish a credits product due to significant demand from its users and prospective users looking to borrow funds to buy digital currencies.
According to Silvergate, the credit-based product is set to launch in the latter part of 2019.
Silvergate’s credit product possesses a structure in which the borrower will provide digital currency or US dollars as collateral in an amount significantly greater than the line of credit.
The bank will then “set a conservative aggregate lending amount to refine the product, and will develop a risk framework to minimize risk and further develop lending models over time.”
The company added that SEN, its proprietary payments platform, is designed for the digital currency industry and will play a large role in the credits product.
“For example, an exchange client could hold the digital currency collateral, we could use the SEN to initially fund the loan from our balance sheet, and in the event of a collateral deficiency, we could immediately sell the digital currency collateral through our exchange client and use the SEN to bring the resulting funds back to our balance sheet,” Silvergate explained.
Finally, the company also mentioned that the credit solution along with SEN will provide “greater capital efficiency for institutional investor clients”
Silvergate added that SEN makes it easier for clients to transact without the necessary need to move liquidity on and off different exchange platform.