Bitstamp, Europe’s largest crypto-exchange with respect to trading volume and one of few exchanges to receive a BitLicense in 2019, recently announced its collaboration with the U.S-based Silvergate Bank to launch a Bitcoin collateralized loan product.
According to the official press release, the crypto-exchange will serve as a launch partner for SEN Leverage, Silvergate’s new product that will enable institutional clients to trade with leverage backed by Bitcoin.
The press release added,
“Bitstamp already uses the SEN network to provide 24/7/365 account funding to eligible customers. We are excited to be working with Silvergate Bank to offer a product that will enable our clients to manage their bitcoin positions with more flexibility.”
In a recent interview with Cheddar, Hunter Merghart, Head of U.S Operations for Bitstamp, discussed the tie-up with Silvergate and the bank’s new SEN product.
Merghart explained that the key objective is to provide more institutional on-ramps and fiat-on ramps for institutional clients. The product also claims to offer institutional clients an easier path with on-ramps, while acquiring institutional leverage with Bitcoin.
The Head of Operations also clarified the fact that initially, it will focus only on institutional clients who are already in the crypto-space. However, Merghart highlighted that the firm is only targeting Non-U.S institutional clients at the start, adding that Bitstamp is looking forward to expanding to U.S institutional clients.
He added that such a trading model collateralized with Bitcoin is picking up pace because of major institutions such as the CME and Bakkt, with their derivatives market gaining interest with every passing day.
Additionally, he added that it is important for crypto-backed companies to merge with traditional finance so that institutional clients have a sense of familiarity that they usually have with another asset class.
Merghart concluded by agreeing with the fact that Bitcoin collateral appeared risky on paper, before clarifying that the product will not be available for retail and a lot of thought has been put forward with consumer protection kept in mind.