Banks welcome crypto firms after banks close

Cryptocurrency firms unbanked by the collapse of two industry lenders have found new homes.

It is according to a Monday (March 27) report by the Wall Street Journal, which says some banks have welcomed business from crypto companies, even as the industry faces increased pressure from US regulators.

This month, two banks once known for courting the crypto sector went out of business. Silvergate Bank voluntarily liquidated on March 8, shortly after saying in a regulatory filing that it had concerns about its ability to remain in business.

Four days later, Signature Bank was taken over by the Federal Deposit Insurance Corp. after a run on deposit.

As PYMNTS has writtenthe back-to-back implosions of both banks was a one-two punch for the crypto world.

Signature operated a proprietary payment network called Signet that allows commercial crypto clients to make real-time payments (RTP) 24 hours a day, seven days a week.

When Silvergate closed, Signet was the only option many firms had to quickly send payments to exchanges, suppliers or even to handle administrative needs like making payroll.

But with those banks gone, other lenders have begun to welcome crypto firms, industry executives tell the WSJ.

“There are dozens of other banks, both onshore and offshore, that are taking advantage of this opportunity,” said Rich Rosenblumpresident and co-founder of crypto trading platform GSR.

Banks willing to serve crypto firms have been inundated with applications over the past two weeks, crypto executives and bankers said, according to the report.

After Signature’s failure, a crypto banker told the WSJ. he turned on his phone’s do not disturb mode so he could get some sleep, but so many texts in rapid succession that his phone overrode the setting.

The report also notes that other banks are wary of getting involved with crypto companies as the industry continues to face pressure from regulators.

As if to illustrate this point, Monday saw reports of the US government taking action against two different crypto firms.

The Commodity Futures Trading Commission (CFTC) charged crypto trading platform Binance and its CEO Changpeng Zhao with violates a number of regulations.

“For years, Binance knew it was violating CFTC rules, and actively worked to keep the money flowing and avoid compliance,” CFTC Chairman Rostin Behnam said in a press release. “This should be a warning to everyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law.”

Meanwhile, regulators have published an order detailing their reasoning cancellation crypto focused Custodia Banks offer to join the Federal Reserve System.

The ruling effectively crushes “lingering industry hopes that Custodia can serve as a qualified and regulated entry into the traditional financial sector,” PYMNTS wrote.

The order states that Custodia “has not been able to demonstrate that it can operate an undiversified business focused on crypto-asset-related activities in a safe and sound manner and in compliance with BSA and Office of Foreign Assets Control (“OFAC”) requirements. “