In the last days, two of the largest crypto-focused banks, Silvergate and Signature, shutter operations. Things went from bad to worse when the Silicon Valley Bank (SVB), which is the 16th largest bank in the U.S., was also shut down and taken over by federal regulators, since then the digital asset industry is dealing with a banking crisis. But there are a few banks and financial institutions still willing to service crypto clients, and here’s all you need to know about them.
The digital asset industry is currently dealing with a banking crisis. In the last couple of weeks alone, we have seen two of the largest crypto-focused banks, Silvergate and Signature, shutter operations. Things then went from bad to worse when the Silicon Valley Bank (SVB), which is the 16th largest bank in the U.S., was also shut down and taken over by federal regulators.
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Moreover, the web3 space has seen added scrutiny since the collapse of FTX. For instance, last month the SEC cracked down on several crypto projects, including Binance USD (BUSD) and Kraken’s staking platform. Around the same time, the U.S. Federal Reserve also denied crypto-focused Custodia Bank access to its payment system and services. And finally, just yesterday, another crypto-friendly bank, Anchorage Digital, announced that it would lay off 20 percent of its staff, citing regulatory uncertainty as one of the main reasons for the move.
These events have caused other banks to distance themselves from the crypto space. Add this to the closure of Silvergate, SVB and Signature, and the crypto industry could soon run out of banking partners. Fortunately, there are a few banks and financial institutions still willing to service crypto clients, and here’s all you need to know about them.
Also Read: Three finance and tech giants that Bitcoin has surpassed in terms of market cap this year
DCG publishes memo highlighting some possible banking partners
One of the largest crypto organisations in the world, the Digital Currency Group (DCG), is on the lookout for potential banking partners for its massive bouquet of digital asset firms and endeavours. In a recently published memo, the crypto conglomerate highlighted a handful of banks that were still willing to do business with crypto platforms and organisations.
According to the memo, HSBC (HSBA), Western Alliance, Deutsche Bank (DB), Santander (SAN), Mercury, Multis, Bridge Bank, BankProv, and Series Financial are some of the banks that are still willing to deal with crypto. In fact, Western Alliance and Bridge Bank are actively engaging with crypto firms and are still opening accounts for them.
The memo highlighted that, while these banks were ready to service the digital asset industry, they would limit the number of services and offerings extended toward crypto firms. For instance, some of these banks are mulling over restricted brokerage, money markets and third-party wire services.
In addition, Larry Cermak, head of research and data at The Block, highlighted some more banks that are welcoming crypto clients. According to Cermak, Customers Bank, Evolve Bank & Trust, First Foundation Bank, Sutton Bank, Quontic Bank, and Cross River Bank are some of the other crypto-friendly banks that are currently still in operation.
Circle taps Cross River Bank for its USDC settlements
Circle is the issuer of USDC, the second-largest stablecoin in the market. The firm was left stranded after the collapse of the Silicon Valley Bank and Signature. This is because Circle stored more than $3.3 billion of its USDC cash reserve at SVB. However, following the bank’s collapse, these funds were then moved to banking giant, BNY Mellon.
Moreover, the stablecoin issuer relied on Signature Bank for its USDC settlements. The bank offered instant and automatic USDC settlements through its proprietary network – SigNet - a blockchain-based, digital payments platform that enabled real-time payments.
Therefore, the closure of Signature threw a wrench in the works for Circle. "With the closure of Signature bank announced tonight, we will not be able to process
True to his word, a few hours later, Allaire announced Cross River Bank as Circle’s new settlement partner. “Circle’s USDC operations will open for business on Monday morning, including with new automated settlement via our new partnership with Cross River Bank,” read Allaire’s tweet.
The Cross River Bank has surfaced as a viable option for many crypto firms considering it is backed by some top venture capitalists players including Andreessen Horowitz, KKR, Ribbit Capital, and Battery Ventures. The bank is touted to have crypto exposure with clients such as Coinbase, Stripe, and Affirm. In addition to Cross River, Coinbase has also turned to JPMorgan and Pathword to deposit customer funds.
Crypto exchange Gemini also confirmed on Monday that it now has zero customer funds held at three collapsed banks. The customer funds are at JPMorgan, State Street, and Goldman Sachs. As per the company, Gemini’s GUSD reserves are securely held at State Street, Goldman Sachs, and Fidelity.
The shutdown of two major crypto-focused banks has caused a lot of problems for the digital asset industry. Moreover, it appears as though regulatory bodies in the U.S. are trying to wall off crypto platforms from critical banking services. These developments highlight the fragile relationship that currently exists between banking firms and crypto businesses. Fortunately, there are still a handful of banking institutions willing to serve crypto clients. However, whether these institutions also face regulatory pressure in the future, remains to be seen.
(Edited by : Anushka Sharma)
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