In addition to attracting hundreds of new clients, Silvergate Bank’s openness to the cryptocurrency industry has also enabled it to rapidly grow noninterest-bearing deposits, reaching $1.7 billion in the third quarter of 2018. The bank capitalizes on the funds it gets from crypto companies by deploying them into interest-earning deposits in other banks and investment securities, as well as into “certain lending opportunities that provide attractive risk-adjusted returns.”
Silvergate Bank’s most important group of customers — “some of the largest U.S. exchanges and global investors in the digital currency industry” — hold their investor funds and operating funds with the bank. Another group of cryptocurrency customers includes software developers, miners, custodians and general industry participants. These entities were said to account for 22.6 percent of the bank’s cryptocurrency customers as of Sept. 30, 2018. And the bank adds that “we believe this group presents future growth opportunities as the digital currency industry landscape continues to develop.”
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