Signature Bank to Offer Bitcoin-Backed Cash Loans

Signature executives said that the bank is still in the process of finding custodians for the bitcoin-backed loans.

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key takeaways

  • Signature Bank plans to start offering bitcoin-backed cash loans to digital asset clients
  • Signature enters the crypto loaning space 10 months after rival Silvergate launched bitcoin-backed loans in June 2020

Crypto-friendly Signature Bank is looking to expand more into the digital asset space. The New York-based bank plans to start offering bitcoin-backed cash loans to digital asset clients, executives announced on Wednesday’s earnings call. 

“We’re going to start doing some lending in the crypto, digital world,” said Joseph DePaolo, president and CEO of Signature, on the earnings call. “There’ll be very deep discounts, and quality custodians will allow us to liquidate when necessary. We’re going to crawl before we walk and we’re going to walk before we run.” 

Signature enters the crypto loaning space 10 months after rival Silvergate launched bitcoin-backed loans in June 2020. Others offering lending services include Gemini, BlockFi and Unchained Capital. 

Signature executives said that the bank is still in the process of finding custodians for the bitcoin-backed loans. Silvergate currently works with Fidelity, Coinbase and Anchorage, among others, to execute its lending services. 

Signature shares rose Wednesday after the bank, which manages $85 billion in assets, reported higher-than-expected first quarter earnings. The bank reported a record profit of $190.5 million, up from $99.6 million during the first quarter of 2020, mostly due to the success of the bank’s digital asset branch. 

“This quarter’s growth, which was across the board, was driven by the digital asset banking team which grew deposits by $4.4 billion,” said DePaolo. 

Signature also grew net interest income, a rarity for most banks with today’s interest rates, and deposits increased during the first quarter. Deposits from digital currency customers make up nearly 16% of total deposits for Signature.  

While the growing institutional interest in digital assets is mostly centered around bitcoin, which is up about 85% so far this year, DePaolo said that going forward, Signature is open to exploring other cryptocurrencies. He did not give specific interest rate yields for the bitcoin-backed loans, but said that they’d be more “than our traditional CNI,” or cash net income. 

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