The California-based parent of Silvergate Bank has detailed its relationships with the cryptocurrency industry as part of its IPO filing with the Securities and Exchange Commission (SEC).
Touting itself as “The Banking Platform for Innovators” in its S-1 prospectus, filed with the SEC on Nov. 16, Silvergate Capital disclosed that the bank now serves 483 crypto clients, with a combined $1.7 billion in non-interest-bearing deposits as of Q3 2018. The number of clients is up from 114 on Sept. 30, 2017, marking an increase of 323 percent.
Its primary customers are crypto exchanges, with $793 million in deposits; institutional investors such as hedge funds and VC funds taking a focus on crypto assets, with $573 million in deposits; and other firms including new protocol developers and miners, with $227 million in deposits.
“The majority of our funding comes from noninterest bearing deposits associated with clients in the digital currency industry,” Silvergate states, adding that that “unique source of funding” offers an advantage over traditional financial institutions. Those deposits are invested into interest-earning deposits at other banks and investment securities, as well as into lending opportunities “that provide attractive risk-adjusted returns,” it says.
Capitalizing on its crypto relationships, the firm has developed its own crypto infrastructure, called the Silvergate Exchange Network (SEN) – a network of digital currency exchanges and investors that, it says, allows “the efficient movement of U.S. dollars between participating digital currency exchanges and investors” around the clock.
SEN was developed and tested in 2017 with some customers and opened up to all crypto-related customers in early 2018.
Bullishly, the corporation believes that the market for crypto-related financial services infrastructure solutions and services is “significant” and will grow as the crypto market grows. The addressable market for fiat currency deposits related to cryptocurrencies is possibly worth $30–$40 billion, it added, citing various research.
For its IPO, the bank is seeking to raise $50 million and aims to list on the New York Stock Exchange under the ticker symbol SI.
“We intend to continue focusing on our digital currency initiative as the core of our future strategy and direction,” said Silvergate.