Fidelity Named Custodian of Silvergate’s BTC Collateralized Loans
- The BTC collateralized loans are funded through the Silvergate Exchange Network (SEN).
- The collateral will be held by Fidelity Digital in its secure cold storage.
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The crypto-focused bank announced that Fidelity Digital Assets, an institutional crypto custody service, will act as the custodian for SEN Leverage, a lending product that provides institutional-grade access to capital through USD loans collateralized by Bitcoin, Silvergate explained in a press release.
SEN Leverage will enable institutional investors to receive USD financing by entering into a loan agreement with Silvergate Bank. The bank will use its proprietary payments network, the Silvergate Exchange Network (SEN), to fund the loans, with the investors’ collateral held by Fidelity Digital Assets.
Silvergate first launched SEN Leverage in Q4 2020 and saw its loan volume increase from $35.5 million in Q3 to $83.5 million at the end of Q4. Partnering with Fidelity Digital will enable the bank to help investors maximize capital efficiency.
Christine Sandler, the head of sales and marketing at Fidelity Digital, said both companies recognized the value of creating a more “seamless” investor experience.
“The ability to access SEN Leverage while maintaining the stability of assets on our custody platform will help us deliver even more value and more choice to our clients to meet their evolving needs,” she explained in the press release.
Investors that have long Bitcoin positions will be able to use their funds as collateral without having to change custody providers. According to Silvergate, providing investors with the ability to finance positions using BTC is indicative of the maturing digital financial services infrastructure.
- Silvergate Bank made the decision to shutter its operations and liquidate its assets due to “recent industry and regulatory developments.
- The company plans to fully repay all deposits, and preserve the “residual value of its assets”, including proprietary technology and tax assets.
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- Silvergate noted that a “transformational shift” in the crypto space left it with a $1.05 billion net loss for Q4 2022, and a $4,7 billion reduction in deposits compared to Q3.
- The company is now taking action to prepare for a “sustained period of lower deposits”, such as managing its expense base and evaluating its portfolio.
- Once the change has been implemented, more than 23,000 U.S.-based companies could allow their employees to invest in BTC through their 401(k) retirement savings accounts.
- Fidelity plans to release the new option later this year, allowing 401(k) account holders to invest up to 20% of their portfolio in BTC.