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After a decade of exclusive domination by unusual cryptocurrency startups, traditional banks are finally starting to generate revenue from custody of assets issued on a blockchain.
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Silvergate Bank is finally reaping the rewards for some of the risks it took by being one of the first banks to allow bitcoin companies to open bank accounts. In an investor call today, the bank in La Jolla, California revealed that it accepted a record $ 586 million in cryptocurrency deposits in the third quarter of 2020, bringing its total cryptocurrency assets to $ 2.1 billion per year. September 30, 2020, up from $ 1.5 billion as of June 30, 2020.
What’s interesting, however, is that the bank is paving the way for how other banks can do something that was previously the sole domain of unusual cryptocurrency startups: generate actual revenue from custody of assets issued on a blockchain. In total, 928 digital currency clients generated $ 3.3 million in revenue for the bank this quarter compared to $ 2.4 million in Q2 2020 and $ 1.6 million for Q3 2019. .
In the wake of a regulatory change that allows banks to hold so-called stablecoins and other crypto assets and a range of other institutional investors entering the space, the news shows a seemingly growing interest in blockchain-based assets. Bitcoin now sells $ 12,974, a bit down from its year high. The total market capitalization for the industry is now approaching $ 400 million, according to Messari data.
“The bank’s infrastructure has provided Silvergate with the foundation for success in what has become a very digital world,” Silvergate CEO Alan Lane said in a statement. “And we see a broad track for further growth given the numerous expansion opportunities.”
In addition to being among the first banks to allow cryptocurrency investors to open bank accounts, the 2020 Blockchain 50 list member has created Silvergate Exchange Network (SEN), a centralized service that among other things allows customers to make quick purchases needed. to arbitrate cryptocurrency markets. During the SEN pilot tests, the bank approved credit lines totaling $ 35.5 million, up from $ 22.5 million in the second quarter.
While other applications are currently in the works, the centralized solution is now only available to Silvergate customers. However, the bank has plans to create an open source blockchain version of the platform that anyone could use.
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In July, the U.S. Office of the Comptroller of the Currency (OCC), a branch of the Treasury that oversees large banks, released a notice allowing banks to provide a variety of services for assets issued on a blockchain, specifically stablecoins which are faster and cheaper to transact with that traditional currency, but backed by real world assets such as the US dollar, making them more stable than bitcoin and most other cryptocurrencies.
In recent months, the $ 10 billion firm Stone Ridge Asset Management has revealed a position of $ 115 million in bitcoin as part of a spin-off largely devoted to custody of crypto-assets, Square has invested approximately $ 50 million in bitcoin and business intelligence firm MicroStrategy converted $ 425 million of its assets into bitcoin. At least 20 institutional investors have already filed documents with the SEC showing they have invested in the Grayscale Bitcoin Trust (GBTC) and Canadian digital asset manager 3iQ has $ 113 million in its Bitcoin Fund launched in April and traded on the Toronto Stock Exchange.
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