The new landscape of crypto banking after the collapse of Silvergate and Signature

Originally written by Yueqi Yang, Suvashree Ghosh and Emily Nicolle Originally compiled by: Luffy, Foresight News

Two months after the collapse of Silvergate Bank and Signature Bank, the crackdown on the U.S. encryption industry continues to intensify, and a new banking landscape behind encryption companies is taking shape.

In the U.S., crypto firms are turning to a handful of smaller regional banks to open accounts. Pennsylvania-based Customers Bancorp is one of the new favourites. Banks in Switzerland and Asia are also playing a bigger role, though they are not yet fully open to clients from the cryptocurrency space. Access to banking services has also deteriorated in the UK, with crypto firms turning to payment service providers as an alternative.

As a result, the new banking system for cryptocurrencies is more decentralized and less US-centric. Bloomberg interviewed more than a dozen industry players, including banks, digital asset exchanges, trading firms, startups and consultants, to compile a list of banks around the world that accept clients in the crypto industry.

Following last year's turmoil and heightened regulatory scrutiny, mainstream U.S. banks have become more cautious about processing wire transfers and holding deposits for crypto companies. The closures in March of La Jolla, California-based Silvergate and New York-based Signature, which once supported much of the crypto industry's banking business, sparked a scramble among crypto firms to find alternatives.

“Now it’s more of a bunch of bank names where you have to go and do your due diligence because they’re not that well-known,” said Rich Rosenblum, president and co-founder of cryptocurrency trading firm GSR.

This week, the U.S. Securities and Exchange Commission (SEC) sued cryptocurrency exchanges Binance and Coinbase for violating its rules, in a strong blow to the industry's biggest players. Both companies have denied the allegations and vowed to defend themselves in court.

“These high-profile lawsuits have brought discussion and attention to many issues in the crypto industry,” said John Popeo, a partner at the Gallatin Group, which advises banks and other firms on regulatory issues.

"This could create more challenges for companies to find banking partners who will be conducting due diligence and researching other issues relevant to the company."

Cryptocurrency exchanges have historically struggled to find banking partners to store deposits and facilitate remittances associated with buying and selling digital assets. Loss of banking services means that cryptocurrencies will be further isolated from the traditional financial industry.

J Austin Campbell, an adjunct professor at Columbia Business School who runs an independent consulting business for crypto companies, said banking for U.S. crypto companies is worse than it was before 2018. Banks want to open operating accounts for businesses without touching users' funds, "but that's not feasible," he noted.

Still, the rebuilding of the crypto banking system is slowly underway. And the good news is that the diversity of banking service providers means the new system may be more resilient. GSR’s Rosenblum said that while banking services are not as seamless as they were a year ago, if a bank today stops supporting cryptocurrencies, “you don’t need to retool the system.”

Here are some of the banks that cryptocurrency companies are turning to, broken down by region:

U.S

Customers Bancorp

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

The bank, which began serving clients in the cryptocurrency space in late 2021, has launched a real-time payment platform similar to Signature's Signet to cater to trading firms, exchanges and institutional investors, enabling them to settle cryptocurrency transactions 24/7. USD transfers.

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

Cross River Bank

The Fort Lee, New Jersey-based company is known for its strong ties to fintech firms, providing banking services to some crypto firms such as Coinbase and Circle. It also provides real-time funds flow with a limit of $1 million per transaction.

Company spokesman Josh Vlasto said that while Cross River is seeing more partners and businesses seeking banking services, the company only considers existing partners and "blue-chip customers who are integral to the fintech ecosystem."

Western Alliance

Headquartered in Phoenix, Arizona, Western Alliance has a blockchain and digital assets team serving clients in the crypto industry. It also offers real-time payments powered by Tassat. The bank "takes a very deliberate approach to who it serves," a representative said in an email.

Axos Financial

The Las Vegas, Nevada-based bank opened accounts for some crypto firms. According to the SEC lawsuit against Binance.US, Axos Financial is one of the banks servicing Binance.US. The bank's earlier plans to expand its broader cryptocurrency-related business, including supporting retail cryptocurrency trading and launching stablecoins, have now been put on hold.

“Given the changes in the market over the last year, Axos currently has no plans to support retail cryptocurrency trading, provide clearing and trading services, or launch a stablecoin,” Johnny Lai Axos, the bank’s senior vice president of corporate development and investor relations, said in an email. "We do not expect these plans to change in the short term," Zhong said.

FV Bank International

FV Bank, registered in the U.S. territory of 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 initiating the settlement of certain cryptocurrencies to U.S. dollars, mostly through third-party brokers.

Asia

Standard Chartered

Standard Chartered is pushing hard into some emerging markets. It holds a majority stake in two UK subsidiaries, cryptocurrency trading platform Zodia Markets and custody unit Zodia Custody, which closed a $36 million funding round led by Japan's SBI Holdings in April.

London-based Standard Chartered provides banking services to "handpicked" digital asset service providers and supports them in moving money in and out of its platform's users, said Rene Michau, the bank's global head of digital assets.

“We see digital assets as an important part of the future of financial services,” Michau said in an email. The bank's services for digital asset companies include corporate accounts, customer fund accounts and foreign exchange, and its service areas are mainly Singapore, Hong Kong and the United Arab Emirates.

DBS

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

The bank offers deposit accounts for regulated digital asset and blockchain companies. It also said in a statement that it provides corporate, institutional and accredited clients access to funds through its own digital platform, DBS Digital Exchange.

ZA Bank

ZA Bank, the largest virtual bank in Hong Kong, plans to provide token-to-fiat exchange services through licensed exchanges.

Founded by Chinese billionaire Ou Yaping and others, ZA Bank will act as a settlement bank for customers, allowing them to withdraw fiat currencies in Hong Kong, China and the United States after depositing cryptocurrencies on the exchange. Currently, it provides funds in and out services to two licensed exchanges in Hong Kong - OSL and HashKey.

Europe, UK

BCB Group

London-based BCB Group provides clients with access to its institutional payments network for digital assets. Called Blinc, the network operates similarly to Silvergate's now-defunct SEN, allowing members to pay each other instantly in multiple currencies.

The payments provider offers merchant accounts, over-the-counter cryptocurrency and fiat trading, and custody of digital assets to clients including exchanges, market makers, lenders, funds, brokers, and traders.

Bank Frick

Bank Frick, based in Liechtenstein, provides banking services for crypto businesses, such as business accounts for established companies and startups in the blockchain and cryptocurrency space. It also offers trading and custody of specific coins, including Bitcoin and Ethereum.

Bloomberg reported late last month that Binance had been discussing a proposal to allow some of its institutional clients to deposit trade collateral with banks, and Bank Frick was one of the potential intermediaries mentioned. Bank Frick declined to comment for this story.

Seba Bank

The Swiss company provides trading, investing in structured products, custody and lending of digital and traditional assets to individual, corporate and institutional clients.

Like traditional banks, Seba offers time deposit accounts and payment services, but it also offers crypto investment tracking and a crypto credit card for spending. Global traffic to the bank's website, particularly from the United States, has increased significantly following the collapse of Signature and Silvergate, the company said in March, adding that crypto firms are applying for accounts with the bank.

Seba managing director Yves Longchamp said: “A direct result of the current market landscape is the inflow of money into us as we realize that our clients’ digital wealth should be managed in the same way as traditional finance.”

Sygnum Bank

With locations in Switzerland and Singapore, Sygnum Bank specializes in digital asset services for institutional and private qualified investors, corporate clients and financial institutions. It provides custody, brokerage, tokenization, asset management, lending, and business banking services, facilitating deposits in Swiss francs, euros, Singapore dollars, and U.S. dollars to help buy, trade, and hold cryptocurrencies.

Mathias Imbach, the company's co-founder and group CEO, said: "We see a continuous increase in inquiries from institutional investors, asset managers and blockchain projects, who want to realize their success through trusted Swiss partners like Sygnum Bank. Crypto investment diversification.”

Clear Junction

Payment service provider Clear Junction offers financial institutions, including cryptocurrency companies, access to UK accounts, virtual international bank accounts, payments networks, currency exchanges and e-wallets. Companies can receive deposits to buy cryptocurrencies, accept payments using traditional bank transfers, and hold funds in their own name using so-called correspondent accounts.