Silvergate’s Exchange Network Handled $166.5B in Crypto-Related Transactions in Q1

Silvergate Capital’s Silvergate Exchange Network (SEN), a fiat on-ramp for bitcoin markets processed 166,772 transactions and transferred $166.5 billion over the network during Q1, the company said in an earnings report released before market open on Tuesday.

The La Jolla, Calif.-based bank, which serves major crypto firms such as Coinbase, Gemini and Kraken, added 135 digital currency customers in Q1. Those customers included nine cryptocurrency exchanges, 88 institutional investors and 38 other types of crypto customers. Q1 net income was $12.7 million, up 40% over Q4.

Crypto firms are often a rich source of low-cost deposits for the few banks that openly serve the sector. In Q1, Silvergate’s average cost of deposits was 0.00%. In contrast, average deposit costs for mid-cap commercial banks are normally around 0.75% to 1.25%.

Silvergate made $12.7 million in net income in the quarter and $7 million in transaction revenue. 

The bank’s average total digital currency deposits during Q1 were $6.4 billion, the high and low daily total digital currency deposit levels were $8.4 billion and $4.6 billion, respectively. Overall, digital currency customer deposits grew by $1.8 billion in the quarter. 

SEN Leverage, Silvergate’s bitcoin-backed lending business that is tied to the SEN, is another place for the bank to deploy new deposits in addition to its traditional commercial real estate (CRE) lending business. The bank processed $117.3 million in SEN Leverage loans in Q1, a 52% increase from the previous quarter and monumental increase from the $2 million in bitcoin-backed loans it did in the same quarter last year. Silvergate’s total loans – including traditional CRE – were $1.6 billion at the end of the last quarter.

Approved credit lines for SEN Leverage increased to $196.5 million in Q1, up from $82.5 million in the prior quarter. In March, the bank announced that it would be extending bitcoin-backed loans to Fidelity clients. 

The bank’s tier 1 leverage ratio – which measures equity capital against risk-weighted assets – remained well above the regulatory threshold of 5% at 9.68%.