Silvergate posts strong Q1 and says it's looking to stablecoins as a growth avenue
Quick Take
- Silvergate’s Q1 2021 earnings call showed the crypto-friendly bank is still growing with the help of its payments platform.
- It’s looking at further opportunities related to “stablecoin infrastructure.”
Crypto-friendly bank Silvergate is still growing with the help of its payments platform, the Silvergate Exchange Network (SEN).
To keep the momentum of Q1 2021, it's looking at opportunities related to stablecoins.
CEO Alan Lane said usage of SEN has continued to grow "at a record pace" during the Q1 earnings call this week. In Q4 of 2020, SEN volume reached $59 billion. That figure jumped to $166 billion in Q1 2021.
The $166 billion was done over about 167,000 transactions this quarter, which Lane said is an 84% increase. An uptick in volume means an uptick in transaction revenue. This quarter saw an 87% increase in transaction revenue compared to last quarter, raking in $7.1 million. Last quarter, Silvergate generated $3.8 million in fee income.
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Part of that increase came from the additional 135 customers added during Q1, bringing the total up to 1,100.
Many of those new customers are also looking to move U.S. dollars in real-time, according to Lane. Deposits from digital currency customers grew from $2.6 billion to $6.4 billion.
At the close of Q4, Lane had said Silvergate was looking to further build out its lending product, SEN Leverage. As of Q1, it's still in the early stages, although there's considerable demand, according to Lane. This quarter it approved $197 million in loans compared to the $83 million of last year.
But Lane said the bank is looking towards a new opportunity as well: stablecoins. In the final slide of the Q1 deck, Silvergate detailed its avenues for growth, including an opportunity entitled "stablecoin infrastructure."
Silvergate didn't explain what this infrastructure will entail. During the call, Lane said there was nothing to share at the moment, and there hasn't been much growth in its current stablecoin offerings yet, but the bank is looking at stablecoins as "an opportunity to significantly grow in the future."
As of now, the bank allows 24/7 mint and burn capabilities using SEN to each of the four American stablecoin issuers.
"We'll look to expand those capabilities in the coming quarters and remain excited about the incredible opportunity in front of us to transform payments and the role that SEN can play in that," said Lane.
It won't be holding stablecoins for issuers, though. Lane said Silvergate is not interested in holding billions in excess deposits as reserves for coins like USD and Gemini dollar. It won't be holding them on its balance sheet either. Indeed, the bank wants to provide infrastructure since it considers itself a "primarily transactional bank," according to Lane.
"This is just a longwinded way of saying that we do not want to be the reserve bank for those deposits," he said.
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