In 2013, the CEO of the Silvergate Bank Alan Lane bought his first Bitcoin. Five years later, he is on our DC Forecasts crypto news site in a report that shows how Silvergate became the leading bank for crypto startups.
Based in La Jolla, California, the bank was deposit-hungry and took on its first crypto exchange as a client in 2013 which was seen as a gutsy move for a financial institution, mostly because at the time bankers viewed Bitcoin as either a fad, a scam or a reputational and regulatory risk.
While speaking at the BlockFS conference in New York recently, Lane recalled:
“Here were these companies that were raising money from reputable [venture capital] firms. They weren’t doing anything illegal, they weren’t doing anything immoral. And yet, they were struggling to maintain bank accounts. So I put our need for deposits together with their need for banking services.”
Currently, Silvergate is a bank that has many crypto startups as clients. Some of the most prominent ones include Coinbase, Gemini, Kraken and bitFlyer. As revealed in the bank’s initial offering prospects (filed this month), there are more than 483 crypto startups working with the bank, all of which contribution roughly $1.7 billion in deposits to the balance sheet as of Q3 this year.
However, Lane admits that most of the crypto startups have had hard times since the beginnings, juggling different responsibilities which were not going to cut it for a bank or its regulators. As he said, “The chief compliance officer is not a multiple-hat type of person.”
In the early days, Silvergate set up processes for ongoing monitoring that matched up deposits with Bitcoin blockchain data. Up until today, he said that his staff might take quarterly visits to exchange offices in order to make sure they have up-to-date monitoring tools across blockchain-based assets.
“We wanted to be able to see both sides of that [bitcoin] transaction,” Lane said. “When you wire $50,000, send us the blockchain address…what we want to see on the blockchain is a transaction that matches up with that $50,000 value.”
To sum things up, Lane also said why Silvergate is slow and selective when onboarding new crypto clients.
“It’s really important that it’s done right because if we have something illegal that goes across our platform, it could be detrimental to our business and to the integrity of the system. So we’re very protective of what we built,” Lane concluded.
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“We will never accept won or renminbi or francs or cryptocurrency, or any other currency. You have to relieve your debts to the state of Ohio with U.S. dollars. That’s what we’re currently accepting. This platform just allows for that exchange, basically before that debt is settled to the state of Ohio.”Sprague pointed out that the treasury is reviewing how the program can be expanded and they are looking into the potential risks that can come up by using this method of tax payments. Ohio is working hard to attract blockchain-related businesses to the state. The state has already passed a law allowing businesses to pay taxes in crypto but the State Treasurer Josh Mandel stated that the legislation ‘’pants a flag’’ in Ohio regarding cryptocurrency adoption. Two days ago, the County Auditors’ Association of Ohio announced the gathering of a group that will work to explore the benefits of blockchain in real estate and transfer of land titles.
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