Anchorage, an institutional grade crypto custodian, partners with Silvergate Bank, a California chartered bank, to introduce crypto backed loans to institutional clients. The ‘SEN Leverage loans’ is a new product by the two firms to allow customers to take out loans collateralized by Bitcoin held in Anchorage vaults.
"Through Anchorage Financing, investors can now obtain, draw on, pay back, and monitor the lines of credit they need in one seamless user experience." –@diogomonica
Read the official announcement: https://t.co/AK7IIRzbxi
— Anchorage (@Anchorage) June 16, 2020
The partnership aims at minimizing the overall movement of digital assets from the safe custodial wallets in a bid to reduce risks of fraud and hacks on users’ funds.
SEN Exchange Network brings institutions into crypto
In a press release, Anchorage launched the “Anchorage Financing” platform that will allow users to obtain lines of credit from the Silvergate Exchange Network (SEN) using their stored digital assets. The SEN platform will be available throughout the year offering capital credit, and processes repayment options in real-time.
Institutions have been afraid of taking up digital assets given the risky nature of holding, and difficulty in moving the coins at will due to the security concerns. Despite custodial services cropping up en masse in the past few years to solve this, the latter problem has not been easy to solve.
But that is changing with the latest partnership, Diogo Mónica, Co-Founder and President of Anchorage, said. In a statement on Medium he writes that the Anchorage Financing platform will “offer users more than security”. He further wrote,
“Anchorage Financing utilizes a sophisticated price monitoring system that automatically alerts the borrower if their collateral value approaches certain pre-established thresholds.”
This allows users to check on their threshold levels to avoid potential collateral liquidation as well as live track their finances without involving a middleman.
A maturing crypto backed loan market
Crypto backed loans market is growing as large banks come on board to lend institutions loans on digital assets collateral. Alan Lane, chief executive officer of Silvergate welcomed the partnership with Anchorage and aims at “creating greater capital efficiency” for their 500+ institutional investors. In a statement on the partnership with Anchorage, Lane said,
“The integration and work that our collective teams have put into this product is a testament to the conviction we have to offer bitcoin collateralized loans and serve our customers, while applying the same rigorous underwriting standards.”
He believes the entry of the big institutions into crypto backed lending services and adoption of digital currencies will push the ecosystem forward.
“It [Entry of institutions] provides a huge validation of the asset class as a whole which in turn should drive more allocations to the asset class from main street asset managers, pensions and endowments.”