Crypto firms seek non-US banks after collapse

Cryptocurrency firms seek banking services outside the US collapse of three major lenders.

“The two biggest crypto-friendly banks are gone“, crypto hedge fund manager Marco Lim told Bloomberg News on Monday (March 13), citing 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 had been trying to open bank accounts in Hong Kong to find alternatives to the Signature account.

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

Silvergate and Signature’s collapse bookended last week’s fiasco Silicon Valley Bank (SVB), which regulators took over after a run on deposits.

The Bloomberg report noted that Signature and Silvergate’s downfalls are particularly problematic, as the banks provided the crypto industry with real-time, 24/7 payment networks.

Crypto companies are once again looking to banks in Switzerland and the United Arab Emirates, part of a shift that began as the US increased 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 crypto exchange KuCoin alleging that the popular cryptocurrency ether.

“The filing by James represents the first time a regulator has argued in court that ether, one of the most valuable digital assets behind the 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 certainty,” PYMNTS wrote.

This action and others, the report said, had caused the crypto markets to stumble. It’s a trend that continued this weekend, when the USDC stablecoin lost its dollar peg.

As mentioned here on Monday, UDSC dipped to 86 cents on concerns that the issuer, Circle, has funds in Silicon Valley Bank.

The stablecoin’s value fell 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, crawling back to 97 cents when Circle said it would use corporate funds to replace money that could not be recovered from SVB.