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BitStamp and Silvergate Bank Have a New Bitcoin Product For Institutionals

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Major European digital asset exchange Bitstamp and U.S.-based crypto-friendly Silvergate Bank partnered to offer leveraged bitcoin trading to institutional customers.

Source: iStock/Andy

The exchange said it will offer custodial and management services for the collateralized bitcoin.

Bitstamp did not elaborate when the new Silvergate’s product, SEN Leverage, to be launched, only saying that they will begin to pilot the product with select institutional customers.

The announcement is not surprising from Silvergate Bank, as the company has already made moves into the cryptocurrency space. Just last year the Winklevoss twins’ Gemini exchange partnered with the company. Additionally, in March 2019, the bank filed with the U.S. Securities and Exchange Commission disclosing relationships with more than 500 cryptocurrency-related clients. These include miners, exchanges, and the like.

The recent movement into the cryptocurrency space by legacy banking firms represents a shift forward for the industry. Once thought to be the currency of the dark web, bitcoin has continued to gain ascendency over the past few years. However, for greater institutional adoption to continue, services in bitcoin must reflect the services that investors have come to expect in the legacy financial realm.

Leveraged trading allows investors to make trades at higher volumes than the coins they actually hold. Instead, coins are used to collateralize trades that take place within user accounts with borrowed funds.

The concept is widely used in the fiat investment world. However, government regulation appears to be cracking down on such trades in the cryptocurrency space.

The Japanese Financial Services Agency has already proposed restricting such trading to just twice the value of the collateral funds. This is far lower than most fiat services, but reflects the fears associated with the overall volatility of cryptocurrency.