Silvergate Capital (NYSE:SI) is a small bank in California that’s been around for over 30 years. Back in 2013, the bank noticed the rise of interest in cryptocurrencies like Bitcoin (CRYPTO:BTC). The bank wanted to land all the new trading exchanges like Coinbase (NASDAQ:COIN) as customers and provide banking services to them and all the institutions that wanted to trade this new digital currency.
So Silvergate created the Silvergate Exchange Network, or SEN, to enable these clients to trade Bitcoin and other forms of crypto 24/7. The way it works, institutions that want to trade crypto open an account at the bank. Then when they trade cryptocurrency on Coinbase or one of the other trading platforms that are aligned with Silvergate, that platform handles the crypto exchange while Silvergate transfers the dollars into its customer accounts.
This has been an immensely profitable venture for Silvergate, and it is just getting started. All of these funds are in trading accounts at the bank. And Silvergate doesn’t pay any interest on the deposits. So this is a windfall