Since its earliest days, the crypto community has been shunned by one of the most important sectors in our economy…
I’m talking about banks.
While it’s not illegal for them to accept crypto clients (you can purchase cryptos through exchanges like Coinbase with an account at Bank of America), banks continue to underserve the crypto community. Especially the crypto exchanges, where individuals buy and sell cryptocurrencies. That includes some of the biggest industry players, like JPMorgan and Bank of America.
Banking is one of the most regulated industries in the world. Rules such as “Know Your Customer” (KYC) and “Anti-Money Laundering” (AML) require banks to run extensive checks on customers—sometimes even the customers of the applicant.
In the case of crypto companies and clients, this process can be difficult. The anonymity of cryptos makes it hard (but not impossible) to know exactly who is sending and receiving funds.
Adding to banks’ concerns is the connection between cryptos and major busts like Silk Road, a black market website used for buying and selling all things illegal. Many on the site used Bitcoin to purchase everything from fake passports to drugs.
Of course, this doesn’t mean cryptos are only for criminals. All currencies—including U.S. dollars—are used for wrongdoing. But because of the above reasons, most banks are waiting on regulatory clarification before opening their doors to crypto businesses… except one.
Calling itself “the banking platform for innovators,” publicly traded Silvergate Capital (SI) is a leading provider of financial services to the digital currency industry. And its goal is to make banking with cryptos as common as depositing a paycheck or using a cash ATM.
Headquartered in California, the bank boasts 20 consecutive years of profitability and over 700 digital currency and fintech customers to date. And back in 2013, it became a true industry pioneer…
As CEO Alan Lane recalled in 2018:
Here were these companies that were raising money from reputable [venture capital] firms. They weren’t doing anything illegal… 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.
So far, Silvergate’s gamble has paid off. It saw a gap in the services of the banking industry and jumped to fill it, gaining nearly 800 digital currency customers (and counting). It’s also avoided any legal or regulatory issues in the process.
Even the trailblazing billionaire Winklevoss twins’ crypto exchange, Gemini, is part of Silvergate’s 24/7 proprietary Silvergate Exchange Network (SEN).
Silvergate’s continued success could be the sea change needed for mainstream crypto acceptance. In the highly competitive banking industry, the proof is in the profits… And big names like Bank of America and JPMorgan aren’t going to sit on the sidelines while a smaller bank gobbles up market share and customers.
For now, keep an eye on Silvergate (SI)… It’s pioneering the future of digital currency banking.