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Alan Lane started his relationship with Bitcoin in 2013. Silvergate Bank's CEO made his first purchase of Bitcoin that year, preceding the addition of the first cryptographic exchange as a customer to the small bank. At the time, and even for now, it was a courageous decision for a bank to be willing to hire this type of client, considering how they were considered scam (in the worst case) or a regulatory risk (at best) .
Lane mentioned this memory at a recent conference, BlockFS, held in New York on Friday, saying:
"Here were these companies that were collecting money from a reputation [venture capital] companies. They were not doing anything illegal, they were not doing anything immoral. Still, they were struggling to keep bank accounts. So, I put our need for deposits together with their need for banking services. "
Now, after five years in the sector, there is no other bank that approaches the services offered to blockchain startups, involved with Coinbase, Gemini, Kraken and BitFlyer. In the recent prospectus of the initial public offering (IPS), the company has elaborated that its current agreements include 483 cryptographic startups. These startups contributed approximately $ 1.7 billion of deposits, according to details until the third quarter of 2018.
Silvergate helped to break down barriers and free up apprehension in the industry by helping exchange executives meet with regulators from their bank. Lane described how, even at the outset, he only wanted to get involved with startups that had staffed legal experts, helping them keep up with compliance protocols.
"At the time, startups had many executives, but no responsibility at all, but Lane emphasizes that" the chief compliance officer is not a multi-person type of person ".
Nick Rosenberg, IT director at the Metropolitan Bank in New York, also spoke at the panel. As one of the few competing banks competing with Silvergate, Rosenberg noted that they are also working to expand their portfolio to include a more diverse range of startups.
Lane argued that Silvergate started investing in foreign exchange, over-the-counter trading windows and institutional investors in recent times. Speaking of the fact that both his bank and Metro have Coinbase as a client, Lane said: "Coinbase is probably the most profitable company in the ecosystem, Coinbase probably has banks with us and every other bank does it on purpose. ". This could go hand in hand with a strategy that was used at the beginning of the industry, working with multiple banks in the event one of them is no longer able to serve them.
Silvergate offers APIs for exchange platforms, making instant transactions for deposits and transactions, regardless of the bank's operating hours. It also creates a sense of calm for users who are concerned with getting their funds in fiat form in a rose. Lane commented,
"This is just as powerful on the way out, on the exit ramp because we've all heard of hacker exchanges."
The use of blockchain and its transparency have made it easier for Silvergate a comfortable place for both sides of the financial sector, reducing the likelihood of intruding into suspicious behavior. Even at the beginning, the company had a process in place that looked at the deposits as Bitcoin's blockchain data.
Lane explained: "We wanted to be able to see both sides of that [bitcoin] transaction. When you link $ 50,000, send us the blockchain address … what we want to see on the blockchain is a transaction that matches that value of $ 50,000. "
Silvergate has been constantly meticulous, which is just another way in which they keep their honest records and their customers happy.
Although Lane said that he was previously unsure of how cryptocurrency could hold any kind of legal currency, he said that Silvergate is "examining the stablecoins" at this point. When he discusses why Silvergate is taking time with the addition of new customers, he concludes the discussion, saying:
"It's really important that it's done well because if we have something illegal going through our platform, it could be detrimental to our business and system integrity, so we're very protective of what we've built. "
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