Silvergate Took Nearly $3B in Deposits From Digital Currency Customers in Q4 2020

Silvergate Bank accepted a whopping $2.9 billion in new deposits from new and existing digital currency customers in the fourth quarter 2020, according to an earnings report released on Wednesday.

The majority of these new deposits came from crypto exchanges which deposited $1.7 billion more in cash to their accounts quarter-on-quarter. Institutional investor deposits grew by $961 million and those from other customers by $234 million. The La Jolla, California-based bank added 41 digital currency customers for a total of 969. 

Crypto firms are often a rich source of low-cost deposits for the few banks that openly serve the sector. For 2020, Silvergate’s average cost of deposits was 0.27%. For scale, average deposit costs for mid-cap commercial banks are normally around 0.75 to 1.25 percent.

The Silvergate Exchange Network, a fiat on-ramp for bitcoin markets, processed 90,763 transactions transferring $59.2 billion over the network during the last quarter. 

“Looking ahead to 2021, I am extremely excited about the multiple paths to continued growth and opportunities to monetize the SEN platform, such as digital asset lending and custodial services,” Silvergate CEO Alan Lane said in a press release. “In particular, SEN Leverage, a lending offering that was piloted through the majority of the past year, is now a core Silvergate product that enables customers to obtain U.S. dollar loans collateralized by bitcoin. We anticipate increased demand for this offering over the next year.”

Fee income collected from digital currency customers was $3.8 million in Q4, a $500,000 increase from the third quarter. Through the whole of 2020, Silvergate raked in $11.1 million in fees from digital currency clients, more than doubling the $4.9 million taken in 2019.

The bank’s tier 1 leverage ratio – which measures equity capital against risk-weighted assets – dipped below 10% in the fourth quarter, but remained well above the regulatory threshold of 5% at 8.29%.

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