Crypto Firms Seek Non-US Banks After SVB/Signature Collapses

Cryptocurrency firms are seeking banking services outside the U.S. following the collapse of three major lenders.

“The two biggest crypto friendly banks are gone,” crypto hedge fund executive Marco Lim told Bloomberg News Monday (March 13), referring to the recently-shuttered Signature Bank and Silvergate Capital, both of which did business in the digital asset sector.

Lim spoke to Bloomberg on a day he’d been scrambling to open bank accounts in Hong Kong to find alternatives to its Signature account.

“I’ve been through too many crises,” said Lim, managing parter of MaiCapital. 

Silvergate and Signature’s collapses bookended last week’s failure by Silicon Valley Bank (SVB), which regulators took over following a run on deposits.

The Bloomberg report noted that Signature and Silvergate’s downfall is especially problematic, as the banks provided the crypto industry with real-time, round-the-clock payment networks. 

It’s left crypto companies looking to banks in Switzerland and the United Arab Emirates, part of a shift that began when the U.S. stepped up regulatory pressure following the collapse of the FTX exchange last year.

As PYMNTS noted last week, even before the Signature and SVB implosions, the “crypto winter” of 2022 has turned into an ice age.

Among the industry’s other recent troubles was last week’s lawsuit by New York Attorney General Letitia James against the crypto exchange KuCoin that alleges that the popular cryptocurrency ether.

“The filing by James represents the first time a regulator has claimed in court that ether, one of the most valuable digital assets behind crypto’s nominal bitcoin, and which has long been treated as a commodity by state and federal regulators, including the Commodity Futures Trading Commission (CFTC), is a security,” PYMNTS wrote.

That action and others, the report said, had sent crypto markets reeling. It’s a trend that continued this weekend, when the USDC stablecoin lost its dollar peg.

As noted here Monday, UDSC dipped to 86 cents due to concerns about its issuer, Circle, having funds at Silicon Valley Bank.

The stablecoin’s value dropped as holders redeemed their tokens and as Circle made it clear that 8% of the funds backing USDC were held at Silicon Valley Bank, according to Coindesk.

At the time, it was unclear how much of the uninsured amount would be recovered and when Circle would be able to do so. However, USDC began to recover value, creeping back to 97 cents when Circle said it would use corporate funds to replace any money that could not be recovered from SVB.