Alan Lane started his relationship with Bitcoin in 2013. The Silvergate Bank CEO made his first purchase of Bitcoin that year, preceding the addition of the first crypto exchange as a client to the small bank. At the time, and even for now, it was a bold decision for a bank to be willing to take on this type of client, considering how they were deemed at scam (at worst) or a regulatory risk (at best).

Lane mentioned this memory at a recent conference, BlockFS, held in New York on Friday, saying,

“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.”

Now, after five years involved in the industry, there’s no other bank that comes close to the services that they offer to blockchain startups, involved with Coinbase, Gemini, Kraken, and BitFlyer. In the recent initial public offering (IPS) prospectus, the company elaborated that their current agreements include 483 crypto startups. These startups have contributed around $1.7 billion in deposits, based on details up to Q3 2018.

Silvergate has helped to break down barriers and release apprehension in the industry by helping exchange executives to meet with the regulators of their bank. Lane described how, even in the beginning, he only wanted to be involved with the startups that were staffed with legal experts on staff, helping them to keep up with compliance protocols.

“Back then, the startups had a lot of executives, but without organized responsibilities. However, Lane points out that “the chief compliance officer is not a multiple-hat type of person.”

Nick Rosenberg, the director of IT with the Metropolitan Bank in New York, spoke at the panel as well. Being one of the few banks with the performance to compete with Silvergate, Rosenberg noted that they are also working to expand their portfolio to include a more diverse range of startups.

Lane argued that Silvergate has been zoning in on exchanges, over-the-counter trading desks, and institutional investors as of late. When discussing the fact that both his bank and Metro have Coinbase as a client, Lane said, “Coinbase is probably the most well-banked company in the ecosystem. Coinbase probably banks with us and every other bank doing this on purpose.” This could go along with a strategy that was used at the start of the industry, working with multiple banks in case one of them is no longer able to serve them.

Silvergate offers APIs to the exchange platforms, making transactions instant for deposits and trades, regardless of the hours of operation of the bank. It also creates a sense of calm for users that worry about getting their funds out in fiat form in a pink. Lane commented,

“That’s equally powerful on the way out, on the off-ramp. Because we’ve all heard of exchanges being hacked.”

The use of blockchain and its transparency has made it easier for Silvergate to make a comfortable place for both sides of the financial industry, reducing their likelihood of engaging in suspicious behavior. Even at their start, the company had a process in place that watched deposits as Bitcoin blockchain data was displayed.

Lane explained, “We wanted to be able to see both sides of that [bitcoin] transaction. 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.”

Silvergate has been continually meticulous, which is just another way that they keep their records honest and their customers happy.

Even though Lane said that he formerly was doubtful of the way that cryptocurrency could hold any type of fiat currency, he said that Silvergate is “looking into stablecoins” at this point. When discussing why Silvergate is taking their time with adding new clients, he wrapped up the discussion, saying,

“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.”

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