The twelfth-largest cryptocurrency exchange, Bitstamp, partnered with cryptocurrency-friendly Silvergate Depository financial institution to pilot Bitcoin (BTC) leveraged trading.

According to an announcement on January. 14, the exchange volition serve as the launch partner for the bank's Silvergate Commutation Network (SEN) Leverage service.

During the pilot stage, the commutation will only offer leveraged trading to select institutional customers. The only collateral currently supported past the service is Bitcoin, which will be custodied past Bitstamp as Silvergate Bank's starting time substitution partner.

Silvergate, the crypto bank

Silvergate Bank's friendliness towards cryptocurrency businesses is seemingly paying off as information technology has penned partnerships with major cryptocurrency firms.

In late August, Gemini, the cryptocurrency substitution founded past the Winklevoss twins, announced that information technology joined Silvergate'southward SEN network to offer 24/7 fiat transfers.

According to a filing with the U.South. Securities and Exchange Commission in March 2019, Silvergate Banking company 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. Nonetheless, such trading as well comes with substantial risks as it introduces the possibility of losses that exceed a trader's initial investment. Equally such, many exchanges suggest that amateur traders do non 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 Apr.

By lowering the maximum rate, the FSA hopes to protect investors from "an excessive corporeality of speculation and the risk of loss due to volatility".