Silvergate brings on Fidelity Digital Assets as a custodian for its bitcoin-collateralized loans

The crypto-friendly bank Silvergate announced Fidelity Digital Assets as a custodian for its collateralized lending service, SEN Leverage.

The bank has been looking to further build out the service, which utilizes its payments platform to deliver U.S. dollar loans collateralized by bitcoin. 

During the Q4 2020 earnings call, Silvergate CEO Alan Lane said the bank was looking to further monetize its Silvergate Exchange Network (SEN) platform, the bank's payment network, through digital asset lending and custodial services.

Since a pilot last year, Lane said the SEN Leverage offering has become a "core product," and he expects increased demand over this year. The underlying SEN Network has seen increasing transfer volumes each quarter.

Silvergate uses SEN to fund the loans, and partnered custodians hold the bitcoin collateral in a separate cold storage account. Adding Fidelity Digital Assets as one of those partners means the institutional investors who already custody their bitcoin with the asset management giant's crypto arm have more seamless access to SEN Leverage. 

"Investors looking to maintain their long bitcoin positions, for example, can use their bitcoin as collateral without the need to change custody providers or alter their position," Silvergate said in its announcement. 

The move might also indicate more partnerships to come for Fidelity Digital Assets, according to a statement from its head of sales and marketing Christine Sandler.

“Like Silvergate, we recognize the opportunity to create a more seamless investor experience by helping institutions maximize capital efficiency, as well as the opportunity to strengthen the digital assets ecosystem through greater integration and collaborations like this."

Silvergate announced Coinbase Custody as a bitcoin custodian for SEN Leverage last week.

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Aislinn Keely joined The Block in the summer of 2019. She is a member of the outlet's policy team, holding down the legal beat. Before The Block, she lent her voice to the NPR affiliate WFUV, where she reported and anchored newscasts in addition to some podcast work. Aislinn is a proud Fordham Ram and editor-in-chief emerita of its newspaper. When she isn't writing or reporting, Aislinn is running and rock climbing.