During the pilot stage, the exchange will only offer leveraged trading to select institutional customers. The only collateral currently supported by the service is Bitcoin, which will be custodied by Bitstamp as Silvergate Bank’s first exchange partner.
The twelfth-largest cryptocurrency exchange, Bitstamp, partnered with cryptocurrency-friendly Silvergate Bank to pilot Bitcoin leveraged trading.
According to an announcement on Jan. 14, the exchange will serve as the launch partner for the bank’s Silvergate Exchange Network (SEN) Leverage service.
Silvergate, the crypto bank
Silvergate Bank’s friendliness towards cryptocurrency businesses is seemingly paying off as it has penned partnerships with major cryptocurrency firms.
In late August, Gemini, the cryptocurrency exchange founded by the Winklevoss twins, announced that it joined Silvergate’s SEN network to offer 24/7 fiat transfers.
According to a filing with the U.S. Securities and Exchange Commission in March 2019, Silvergate Bank served 542 digital currency-related clients including cryptocurrency exchanges and miners, custodians and global investors, among others.
Regulation of crypto margin trading
Leveraged trading allows traders to borrow funds in order to increase their potential profits. However, such trading also comes with substantial risks as it introduces the possibility of losses that exceed a trader’s initial investment. As such, many exchanges suggest that amateur traders do not engage in leveraged trading.
Leveraged cryptocurrency trading is seeing increasing attention from Japanese regulators. As Cointelegraph reported yesterday, the Japanese Financial Services Agency (FSA) proposed lowering the leverage rate limit of cryptocurrency margin trading from 4x to 2x. The regulator reportedly plans to put the order into practice in April.
By lowering the maximum rate, the FSA hopes to protect investors from “an excessive amount of speculation and the risk of loss due to volatility».
Bitrue Exchange to Launch Crypto-Backed Loan Platform
Singapore-based exchange Bitrue is launching a low-interest crypto lending platform, the company said.
The service, which goes live on Sept. 30, loans BTC, ETH XRP and USDT at a 0.04% daily interest rate. Users pledge existing Bitrue-held crypto assets as collateral against their $100-minimum loans.
Bitrue will fund its novel “power piggy” crypto-holding rewards program with users’ loan interest payments.
The loan platform rollout is part of a larger shift for the XRP-focused exchange, CEO Curis Wang said in a statement, alluding to more financial instruments in the pipeline.
“Bitrue’s goal from the beginning was always to bridge the emerging crypto markets with the traditional financial services sector”, Wang said.
“It’s a perfect time for us to launch the first of our initiatives.”
The new product launch comes only three months after the company was sidetracked by hackers stealing more than $4 million in users’ crypto assets from the exchange. Company representatives said those funds were insured and users were made whole.
