Fidelity Digital Assets will soon partner with Silvergate Bank as its second lender for cryptocurrency-backed loans. With Fidelity as their cryptocurrency custodian, Silvergate Bank will be the second lender to offer bitcoin-backed loans to investors.
A bitcoin loan is a loan with bitcoin as collateral. This is achieved by sending bitcoin to a multi-signature address. After a bitcoin transaction is validated on the blockchain, amounts are sent to a client's bank account, and the loan's interest is charged monthly.
Since June 2020, Silvergate has been offering loans backed by bitcoin and other cryptocurrencies via its Silvergate Exchange Network (SEN).
Institutional investors who currently store their bitcoin with Fidelity Digital Assets can now access SEN Leverage through this initiative.
After partnering with crypto lender BlockFi, Fidelity began accepting bitcoin as collateral for cash loans in December.
"Like Silvergate, we recognize the opportunity to create a more seamless investor experience by helping institutions maximize capital efficiency, as well as the opportunity to strengthen the digital assets ecosystem through greater integration and collaborations like this," Christine Sandler, head of sales and marketing at Fidelity Digital Assets, said in a press release.
"Investors looking to maintain their long bitcoin positions, for example, can use their bitcoin as collateral without the need to change custody providers or alter their position," Silvergate said in its announcement.
Silvergate announced Coinbase custody as a provider of Bitcoin collateralized US Dollar loans last week.
Bitcoin businesses have been pounding on the SEC's door for years in the hopes of launching a Bitcoin ETF, only to be met with a firm no. The mighty Fidelity Investments is now one of the companies knocking on the door, and that's likely to be a game-changer.