The future of crypto banking, in all likelihood, has not been as shaky and uncertain since the sector’s last extended bear market, industry participants said this week.
There are, though, a number of indicators that crypto’s specific set of financial circ*mstances may not be as dire as they may appear, even considering the unwinding of industry stalwarts Signature and Silvergate. Not to mention the tech-oriented Silicon Valley Bank (SBV), which had a number of crypto clients.
On one hand, “what happened with SVB is much bigger than crypto,” according to Spencer Randall, the co-founder of industry research firm CryptoEQ. On the other, he said, the most recent tumult — irrespective of its cause — has underscored areas of concern for the industry.
“I feel like crypto has been beaten down significantly and dragged through the mud for the past several years — ever since…the exuberance washed out of the market,” Randall told Blockworks.
Front and center among industry concerns is stablecoin USDC’s temporary unpegging from its dollar tandem over the weekend, Randall told Blockworks.
“It’s deeply concerning for all the builders, the companies, the people that are directly affected by this,” the executive said. “But I’d like to see [mainstream] attention where it needs to be, which is traditional finance, which is also extremely fragile and fraught with problems.”
Daniele Servadei, CEO of crypto transactions company Sellix, said in a statement the loss of banking partners for crypto companies has made it more difficult for them to offer their services in a way that is consistent with the expectations of the SEC.
But the collapse of Silvergate, SVB and Signature, he added, has underscored the US government’s efforts to tighten up crypto usage in the country, perhaps paving “a silver lining.”
“This realization could lead to a renewed interest in DeFi, as more people recognize the potential of decentralized financial systems that are not reliant on traditional banking institutions,” Servadei said.
Where are crypto firms banking now?
Even before the latest issues endured by Silvergate, SVB and Signature, a number of banks were looking to distance their operations from the industry.
New York-based Metropolitan Commercial Bank said last month the firm was closing out its relationships with institutional clients engaged in crypto in light of the industry’s “recent developments” and regulatory shifts.
Others, like Customers Bank, said they would stay the course. A spokesperson for the company, which with blockchain-based real time payments platform Tassat launched the Customers Bank Instant Token (CBIT) in 2021, told Blockworks at the time it was not considering a crypto exit.
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The Customers Bank representative did not return a request for comment on Monday.
BCB Group CEO Oliver von Landsberg-Sadie said more than 200 companies in the crypto space use BCB for payment rails in currencies other than USD.
Founded in 2017, the London-based firm is a provider of business accounts and trading services for crypto firms such as Kraken, Bitstamp, Crypto.com and Fireblocks.
The phone has been ringing “off the hook,” the CEO told Blockworks from other firms now seeking services from the London-based financial institution. BCB Group had more than 60 inbounds last Friday alone from companies such as Canadian crypto brokerage Satstreet and BitPanda Pro.
Landsberg-Sadie added that BCB Group is getting set to add US dollar capabilities to its instant settlement network, BLINC. This new offering, set to go live in the next six to 12 weeks, comes after the shutdown of Silvergate’s exchange network, SEN.
Signature’s digital payments platform, Signet, has continued operating to help facilitate intra-bank payments for Signature’s clients.
Cross River partners with USDC issuer Circle
Crypto firms still have other options for banking services, as well.
Alex Miller, CEO of crypto company Hiro, said infrastructure companies and exchanges in the sector can turn to Cross River Bank and Prime Trust.
USDC issuer Circle on Sunday revealed a new partnership with Cross River — a company that Coinbase also calls a bank partner. Founded in 2008, Cross River Bank will work as Circle’s commercial banking service for producing and redeeming USDC.
“Silvergate and Signature were both very popular with crypto not just because they were able to work with the companies well, but also because they built special payment rails to allow 24/7 settlement between their clients — such as when Coinbase and Circle wanted to exchange funds to mint new USDC,” he told Blockworks. “It will be interesting to see if any bank steps up to build something similar going forward.”
Circle also said the remaining holdings it has at Silicon Valley Bank will move to BNY Mellon, where the company currently keeps the majority of its total $9.7 billion cash holdings.
BNY Mellon, which launched its digital asset custody platform to select US institutional clients in October, declined to comment about its relationships with crypto clients and potential future crypto-related offerings.
Coinbase tweeted that, as of March 10, the crypto exchange had roughly a $240 million balance in corporate cash at Signature. Coinbase said it was facilitating all client cash transactions with other banking partners.
In addition to Cross River, other institutions at which Coinbase may deposit customer funds include JPMorgan Chase and Pathword (formerly known as MetaBank).
Coinbase plans for business continuity in the event of bank partner service disruptions, a company spokesperson told Blockworks in a statement. The representative declined to comment on whether it intends to add banking partners in light of Signature’s fall.
“We regularly conduct thorough reviews of counterparty risks, including of the banks we use,” the spokesperson said. “While we have confidence in our bank partners, we do have contingency plans and redundant payment rails to ensure we could continue to serve our clients and provide them access to their cash stored with Coinbase in the event we encountered changes with our bank partners.”
Meanwhile, Gemini said Monday it has zero customer funds — as denominated in dollars — held at Signature Bank, Silicon Valley Bank (SBV), and Silvergate Bank. Those funds are held at JPMorgan, Goldman Sachs and State Street.
Gemini’s dollar (GUSD) reserves are held at Goldman Sachs, State Street and Fidelity, according to the company.
Su Carpenter, director of operations for crypto advocacy group CryptoUK said events in the last few days highlight the desperate need for better access to banking relationships for crypto businesses.
Binance informed its users Monday that it would be suspending deposits and withdrawals in British pounds, due to its losing its UK banking partner.
Aside from BCB, Carpenter told Blockworks that only a handful of organizations in the UK — such as Clearbank and Clearjunction — offer crypto banking services.
“[We] hope that we see an increase in the number of larger institutions willing to provide financial products, including lending and custody, to crypto businesses,” Carpenter said. “This would help drive innovation, better protect consumers, and help crypto businesses de-risk by spreading funds across more providers.”
Updated March 16, 2023 at 10:22 am ET: Made correction to indicate Signature Bank’s Signet platform continues to operate.
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