Whether you love, hate, or are completely indifferent to them, it’s impossible to deny that cryptocurrencies have entered the mainstream. And while Warren Buffet still might not be a fan, institutional interest has contributed to the current popularity of alternative currencies.

While adoption by companies like Visa, PayPal, Square, and Tesla in recent years has made it easier for consumers to make use of cryptocurrencies and gone some way to legitimizing the idea of them as actual currency, most traditional banks in the U.S. are yet to take the plunge.

One bank, however, has not only been crypto-friendly for almost a decade, but it has also been at the forefront of facilitating the integration of alternative currencies with mainstream financial institutions, as a major partner of cryptocurrency exchanges and advocates.

Silvergate Capital is a leading financial infrastructure provider of cryptocurrency solutions for institutional and commercial customers. The company’s Silvergate Exchange Network (SEN) has been critical in increasing institutional demand for digital currencies as it has provided a global payments platform that enables the real-time transfer of U.S. dollars between digital currency exchange customers and institutional investors. This virtually instantaneous payment network for participants in the digital currency industry serves as a platform for the development of additional products and services.

Silvergate wants to be the premier bank for crypto and is one of the only banks that has most of its deposit business devoted to the industry. Looking ahead the company is evaluating additional services specifically targeted at providing further financial infrastructure solutions to its customers and strengthening its SEN network effects. It aims to achieve this through further global expansion and with new products like margin lending that will provide secure, institutional-grade access to capital through USD loans collateralized by bitcoin.


Silvergate Bank was formed over 30 years ago as an industrial loan company in Southern California. In 1988, it was originally focused on commercial real estate lending and wholesale deposit activities. Stopping its mortgage operations in 2005 before the subprime meltdown, the bank was in a solid position when the 2008 financial crisis hit, as it was able to continue lending as many other banks were paralyzed by bad mortgages on their balance sheets. In 2009, it became a state-chartered commercial bank, subsequently gaining approval as a Federal Reserve member bank in 2012.

Silvergate’s ability to stay profitable during the financial crisis meant it had no shortage of lending opportunities, however, there was a problem in getting enough customer deposits to fund those loans. Silvergate looked to cryptocurrency companies to fill that gap and it transitioned to accepting the community’s excess fiat capital, bringing in a stream of non-interest-bearing deposits. It then converted these into interest-bearing deposits at other banks, investment securities, and loans. As a result, major clients include the Winklevoss twins’ Gemini exchange, Paxos, bitFlyer, and Kraken.

As one of the first U.S. financial institutions to fully embrace the industry, the backstory has given Silvergate social capital among crypto companies, as many would have had significantly more difficulty operating without Silvergate’s services.

The company went public in November 2019 and continues to be one of just a handful in the U.S. willing to bank cryptocurrency firms. Silvergate is also taking it a step further, creating products specifically to serve the industry, as well as bringing a legacy banking system that only operates 40 hours a week into the 24/7 crypto markets that never sleep.


Silvergate’s chief executive officer, Alan Lane, has been with the company since 2008. With over four decades of corporate and financial institution leadership experience, he formerly held several senior executive roles including companies such as Southwest Community Bancorp, Financial Data Solutions Inc, and Bank of California.

Fellow long-term chief operating officer, Kate Fraher, has an extensive background in all aspects of banking, managing regulatory relationships, and compliance. For the last five years, Lane and Fraher have been joined by HSBC and KMPG veteran, Ben Reynolds, who as chief strategy officer is responsible for crafting Silvergate’s strategy, product development, marketing, and M&A activities.


Silvergate’s business model and vision differ from those of a traditional bank. While it provides financial services that include commercial banking, real estate lending, and mortgage warehouse lending services, it is heavily focused on its products and services to emerging financial technology companies throughout the United States and beyond. As a result, and when combined with its success in supporting the fintech industry, Silvergate has characteristics relatively unique to banking, including a client base consisting primarily of businesses, a fully online platform, a diverse asset mix, and a highly flexible and liquid balance sheet.

The company currently targets its services in three core markets. They serve almost 100 clients operating exchanges through which digital currencies are bought and sold, including over-the-counter trading desks and digital-first retail platforms. Their largest client group cover over 800 institutional investors ranging from hedge, venture capital, and private equity funds, along with family offices, and traditional asset managers investing in digital currencies. Finally, they also cater to almost 400 “other” clients including companies developing new protocols, platforms, and applications, among others relevant to the industry.


Silvergate’s willingness to work with cryptocurrency companies has been key to the growth of the digital asset industry overall. Wall Street banks have been hesitant to take on bitcoin-related clients, and many have banned customers from using credit cards to buy cryptocurrency. However, seizing the opportunity has given Silvergate an edge because of how it is using its network of cryptocurrency clients. Rather than just providing a place to store money, the bank has become a clearinghouse, facilitating real-time transactions that can otherwise take days.

The Silvergate Exchange Network, which allows customers to instantly move dollars between different crypto exchanges and is open even on weekends, has set the company apart from every other bank. The platform has given clients the ability to transact with other blockchain counterparties 24/7. Without the SEN, crypto companies would be bound to the Fedwire system on which banks settle transactions.

This network effect helped the bank massively increase its customer base in the last few years and only makes it more valuable as participants and utilization increase. If a Silvergate customer wants to do business with someone who doesn’t have a Silvergate account, they have to initiate a wire or ACH transfer, which can take longer. As a result, clients are reaching out to others to join the network.

The SEN has enabled Silvergate to significantly grow noninterest-bearing deposit products for digital currency industry participants. This unique source of funding is a distinct advantage over most traditional financial institutions and allows them to generate revenue from a conservative portfolio of cash investments and short-term securities. While interest revenue currently accounts for the majority of the company’s revenue mix at just over 75%, the use of the SEN has also increased noninterest income that Silvergate believes will become a valuable source of additional revenue going forward, as they develop and deploy fee-based solutions in connection with its digital currency initiatives. In February, Silvergate expanded the SEN to Europe, giving euro currency customers the same flexibility as their U.S. counterparts.

While the SEN has already been a tremendous source of growth, both in digital currency deposits as well as transaction revenue, the bank is looking to bitcoin margin lending to be the next step in “driving capital efficiency” for its customers. The product, called SEN Leverage sees traders enter into an agreement with Silvergate to borrow USD to deposit at “Exchange”, which then uses the SEN to transfer U.S. dollars to the trader’s leverage account on its platform.

Another key area of focus for expansion is Silvergate’s efforts toward launching a stablecoin that aims to eliminate price volatility by being tied to a real-world asset such as the U.S. dollar, while retaining the qualities of a cryptocurrency. The company recently acquired the blockchain payment network assets from Meta’s Diem Group for $182 million. Silvergate is uniquely positioned to leverage the technology to enable a stablecoin that will enable a next-generation global payment system that is faster, easier to use, and more cost-effective than existing solutions.


The value of Silvergate’s platform and continued progress on strategic initiatives saw the company start 2022 on a strong note. Despite the first quarter being one of the most challenging periods for the broader crypto ecosystem since the beginning of the covid pandemic, there was continued growth in customers, SEN Leverage commitments, and average deposits. Movements in the key metrics saw:
– Digital currency customers grew to 1,503 at March 31, 2022, compared to 1,104 in 2021, while digital currency customer-related fee income for the quarter was $8.9 million, compared to $7.1 million for the first quarter of 2021.
– Total SEN Leverage commitments were $1,070.1 million at March 31, 2022, compared to $196.5 million in 2021.
– Average digital currency customer deposits grew to $14.7 billion, compared to $13.3 billion during the fourth quarter of 2021.

In addition, the SEN handled $142.3 billion of U.S. dollar transfers in the period. While this was down from $166.5 billion in the first quarter of 2021, the company’s cumulative U.S. dollar transfers on the platform crossed $1 trillion.

Net income for the quarter was $27.4 million, up an impressive 115.5% from $12.7 million in 2021. Consensus estimates are indicating that Silvergate will continue its strong momentum with revenue expected to grow 86% year-on-year to $324.4 million, up from $174.5 million in 2021. While consensus EPS growth of 47% would see earnings per share come in at $4.03, up from $2.73 in 2021.


There are inherent risks in the crypto landscape, in particular, volatility has been a significant concern. However, even as bitcoin and other cryptocurrency prices lost more than half their value in the first quarter of 2022, Silvergate clients more than doubled. In addition, the bank benefits from its institutional clients being less fickle and reactive than retail investors, as a result, when digital currency prices stabilize or go down, they don’t see large outflows.

While Silvergate has benefited from the rapid growth of cryptocurrencies, the bank has not been immune to some of the issues that have prevented other banks from entering the space. They have been required to exit relationships with cryptocurrency companies because of compliance issues, however, to ensure quality clients, the company heavily vets customers to make sure they don’t invest in the next fraud. The bank also mitigates much of its financial risk by the amount of cash it has sitting in its accounts, ensuring that it has sufficient liquid assets to handle a very substantial outflow.


Currently, there is no other bank as focused on cryptocurrency as Silvergate, and its first-mover advantage looks set to position the bank to benefit from various macro trends. It has demonstrated solid success in growing customers and revenue, and its continued work on expanding its SEN and stablecoin initiative has it well placed to push its next phase of growth and continue increasing transaction revenue and deposits.

While it is trading at a relatively high forward price-to-earnings ratio of 27 compared to other banking stocks, Silvergate’s unique focus on cryptocurrency and compelling outlook for growth appear to warrant a reasonable premium.

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