Bloomberg: New Landscape of Cryptocurrency Banks after the Collapse of Silvergate and Signature

The crackdown on the US cryptocurrency industry has intensified following the collapse of Silvergate Bank and Signature Bank two months ago, with a new banking landscape emerging behind cryptocurrency companies. In the US, crypto companies are turning to smaller regional banks, with Customers Bancorp in Pennsylvania emerging as a favourite. Swiss and Asian banks are also playing a bigger role, although they have yet to fully embrace customers from the cryptocurrency space. In the UK, the requirements to obtain banking services have also become more stringent, leading crypto companies to turn to payment service providers as an alternative.

As a result, the new banking system for cryptocurrencies is more decentralised and no longer centred on the US. Bloomberg interviewed over a dozen industry participants, including banks, digital asset exchanges, trading firms, start-ups and advisers, to compile a global list of banks that accept cryptocurrency industry clients.

With last year’s turmoil and increasingly stringent regulatory scrutiny, mainstream US banks have become increasingly cautious about handling wire transfers and holding deposits for cryptocurrency companies. Silvergate, based in La Jolla, California, and Signature, based in New York, closed in March, having supported most of the industry’s banking business, sparking a scramble among crypto companies to find alternatives.

Rich Rosenblum, President and Co-Founder of cryptocurrency trading firm GSR, said: “Now it’s more a bunch of bank names that you have to do due diligence on because they’re not as well-known.”

This week, the US Securities and Exchange Commission (SEC) sued cryptocurrency exchanges Binance and Coinbase for violating its rules, dealing a heavy blow to the industry’s biggest players. Both firms have denied the charges and said they will defend themselves in court.

“These high-profile lawsuits spark discussions and attention on many issues in the crypto industry,” said John Popeo, Partner at Gallatin Group, which advises banks and other companies on regulatory issues. “This could pose more challenges for companies seeking banking partners, as those partners will conduct due diligence and examine other issues related to the company.”

Cryptocurrency exchanges have long struggled to find banking partners to store deposits and facilitate remittances related to buying and selling digital assets. Losing banking services means that cryptocurrency will be further isolated from traditional finance.

J Austin Campbell, a part-time professor at the Columbia Business School who runs an independent outfit that provides consulting services to cryptocurrency companies, said that banking for US cryptocurrency companies has gotten worse compared to before 2018. He noted that banks want to open operational accounts for businesses without touching user funds, “but that’s not feasible.”

Nevertheless, reconstruction of the cryptocurrency banking system is slowly underway. The good news is that the diversification of banking service providers means that the new system may be more flexible. Rosenblum of GSR said that while banking services are not as seamless as they were a year ago, “you don’t need to re-adjust the system if a bank stops supporting cryptocurrency today.”

Here are some banks that cryptocurrency companies are turning to, sorted by region:

United States

Customers Bancorp

Some of the largest cryptocurrency companies have turned to Customers Bancorp, a bank based in West Reading, Pennsylvania, led by founder and CEO Jay Sidhu.

The bank began serving customers in the cryptocurrency field at the end of 2021, launching a real-time payment platform similar to Signet called Signet, to cater to the needs of trading firms, exchanges, and institutional investors, enabling them to settle US dollar transfers related to cryptocurrency trades around the clock.

The issuer of the stablecoin USDC, Circle Internet Financial, now uses Customers Bancorp’s CBIT payment network for real-time settlement of dollars. Cryptocurrency exchanges Coinbase and Bitstamp USA, as well as trading firm GSR, are all customers of Customers Bancorp.

Cross River Bank

This company, based in Fort Lee, New Jersey, is known for its close ties to fintech companies, and provides banking services to some cryptocurrency companies, such as Coinbase and Circle. It also provides real-time fund flow with a transaction limit of $1 million.

Company spokesperson Josh Vlasto said that while Cross River sees more partners and companies seeking banking services, the company only considers existing partners and “blue-chip clients that are essential to the fintech ecosystem.”

Western Alliance

Western Alliance is headquartered in Phoenix, Arizona, and has a blockchain and digital assets team that serves clients in the cryptocurrency industry. It also offers real-time payment functionality supported by Tassat. A representative said in an email that the bank “took a very careful approach to the selection of service objects.”

Axos Financial

This Las Vegas-based bank has opened accounts for some cryptocurrency companies. According to the US Securities and Exchange Commission’s lawsuit against Binance.US, Axos Financial is one of the banks that provided services to Binance.US. The bank earlier planned to expand its broader cryptocurrency-related business, including supporting retail cryptocurrency transactions and launching stablecoins, which are now on hold.

“Given the changes that occurred in the market last year, Axos currently has no plans to support retail cryptocurrency transactions, offer clearing and trading services, or launch stablecoins,” said Johnny Lai, the bank’s senior vice president of corporate development and investor relations, in an email. “We do not expect these plans to change in the near term.”

FV Bank International

FV Bank, based in Puerto Rico, is the first bank in the Commonwealth to launch digital asset custody services. It allows customers to hold bitcoin and dollars in the same bank account. It is launching settlement of certain cryptocurrencies against dollars, primarily through third-party brokers.

Asia

Standard Chartered

Standard Chartered Bank is aggressively expanding in some emerging markets. It holds a majority stake in two UK subsidiaries, cryptocurrency trading platform Zodia Markets and custody department Zodia Custody, which completed a $36 million financing led by Japan’s SBI Holdings in April.

“We provide banking services to carefully selected digital asset service providers and support them in offering funding in and out services to their platform users,” said Rene Michau, global head of digital assets at the London-based Standard Chartered Bank, in an email. The bank’s services to digital asset companies include corporate accounts, customer fund accounts, and forex, with a focus on Singapore, Hong Kong, and the United Arab Emirates.

DBS Bank

DBS Bank is the largest bank in Singapore and the largest listed company in Singapore. It was established in 1968, the third year after Singapore separated from Malaysia and became an independent country.

The bank provides deposit accounts for regulated digital asset and blockchain companies. It also stated that it provides fund in and out services for corporate, institutional, and accredited clients through its digital platform, DBS Digital Exchange.

ZA Bank

ZA Bank is the largest virtual bank in Hong Kong and plans to offer token-to-fiat currency conversion services through a licensed exchange.

ZA Bank, founded by Chinese billionaire Eu Yafei, will act as a settlement bank for customers, allowing them to withdraw fiat currencies from Hong Kong, China, and the United States after depositing cryptocurrencies on the exchange. Currently, it provides fund in and out services for two licensed exchanges in Hong Kong: OSL and HashKey.

Europe, UK

BCB Group

London-based BCB Group offers clients access to its institutional payment network for digital assets, called Blinc, which operates similarly to SEN, the now-defunct network run by Silvergate, allowing members to make instant mutual payments in a variety of currencies.

The payment service provider offers business accounts, OTC cryptocurrency and fiat currency trading, digital asset custody services to clients including exchanges, market makers, lenders, funds, brokers and traders.

Bank Frick

Bank Frick, based in Liechtenstein, provides banking services to crypto companies, such as business accounts for established and start-up companies in the blockchain and cryptocurrency space. It also offers trading and custody of specific tokens, including bitcoin and ether.

Last month, Bloomberg reported that Binance has been discussing a proposal to allow some institutional customers to place trades using collateral held at banks, with Bank Frick being one of the potential intermediaries mentioned. Bank Frick declined to comment.

Seba Bank

The Swiss company offers trading, structured product investments, custody and lending services for digital and traditional assets to individuals, companies and institutional clients.

Like traditional banks, Seba offers time deposit accounts and payment services, but it also provides crypto investment tracking and a crypto credit card for consumer use. The company said in March that global traffic to its banking website had increased significantly, particularly from the US, and added that crypto companies are applying to open accounts with the bank following the collapse of Signature and Silvergate.

Seba CEO Yves Longchamp said: “The direct result of the current market situation is that a large amount of funds are flowing to us, because we realize that customers’ digital wealth should be managed in the same way as traditional finance.”

Sygnum Bank

Sygnum Bank, which operates in Switzerland and Singapore, specializes in providing digital asset services to institutional and private qualified investors, corporate clients, and financial institutions. It provides custody, brokerage, tokenization, asset management, lending, and commercial banking services, facilitating deposits in Swiss francs, euros, Singapore dollars, and US dollars to help purchase, trade, and hold cryptocurrencies.

The company’s co-founder and CEO, Mathias Imbach, said: “We see continued growth in consulting for institutional investors, asset management firms, and blockchain-related projects who want to diversify their investments in cryptocurrencies through trusted Swiss partners such as Sygnum Bank.”

Clear Junction

Payment service provider Clear Junction offers access to UK accounts, virtual international bank accounts, payment networks, currency exchange, and e-wallets for financial institutions including cryptocurrency companies. The company can receive deposits for the purchase of cryptocurrencies, accept payments using traditional bank transfers, and hold funds in its own name using so-called agent accounts.

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