Crypto companies ask Jamie Dimon to keep their money

Sir, please accept our funds.
Photo: Marco Bello/Bloomberg via Getty Images

Some crypto companies seeking new bank accounts after the recent failures of Silvergate, Silicon Valley Bank and Signature Bank have found a surprisingly warm welcome in an unlikely place: JPMorgan Chase and certain other “too big to fail” banks.

JPMorgan is opening new bank accounts for crypto firms, such as VC funds and web3 infrastructure startups, which are moving their deposits to the bank, according to people familiar with the matter. The bank, led by crypto-skeptic Jamie Dimon, is not soliciting the business of crypto customers whose deposits have been stranded in the shuttered banks, one of the people said, but it is not automatically rejecting them either.

“Systemically important banks are picking up more crypto business as they see the growth trajectory of the industry,” said Chris Burniske, a partner at Placeholder, a venture capital firm specializing in blockchain technology. “The failure of their smaller peers represents a momentary opportunity for them to grow their own lines of business.”

A representative at another major crypto venture capital fund says: “We called a lot of banks that are big brands from the too-big-to-fail category. I can’t say anyone who said no to us.”

The willingness of the major commercial banks to accept money from crypto firms represents a departure from the generally cryptophobic attitude on Wall Street in recent months, especially after the collapse of FTX caused many institutions to distance themselves from digital currency. In January, a trio of US banking regulators issued a warning to the financial industry about the risks of dealing with cryptocurrencies, prompting banks to minimize their relationships with digital currency companies.

But the collapse of Silvergate, SVB and Signature Bank – which were among the top crypto-friendly banks in the US – has left the cryptocurrency industry scrambling to find banking services. Some crypto startups and other web3 companies approached a handful of remaining smaller banks known to be crypto-friendly, including New Jersey-based Cross River Bank and San Francisco upstart Mercury. And the last few days, some companies – especially well-funded crypto startups and investors – found the big banks more receptive than they had been in the past.

“They’re all more open to beating us,” says Yossi Hasson, co-founder and CEO of Metaversal, a firm that invests in NFTs, which raised $50 million last year, though he declined to specify where he had applied for new accounts. “Before, you just wouldn’t get through compliance,” he adds. “And now magically you can.”

The crypto companies that have been able to move money to top US banks – which include JPMorgan Chase, Citi, Bank of America and Wells Fargo – were unwilling in recent days to publicly name the institutions where they opened accounts for fear of putting the already fragile relations at risk. But crypto executives said JPMorgan and Citi have been the most welcoming to crypto companies among the big banks. Goldman Sachs, which banks a selection of crypto companies including Gemini, declined to comment, as did Citi and Wells Fargo. Bank of America did not respond to a request for comment.

Still, executives at both cryptocurrency firms and banks warned that there are many other crypto startups with money sitting in Silvergate, Signature and SVB struggling to find a new bank. “Even though they call like crazy, the vast majority reject the deposits, because they simply do not meet our standards. Unless they are the blue-chip fintech,” says an employee at Cross River Bank.

The sudden loss of crypto banks has led to companies e.g Krakena leading US-based bitcoin exchange, as well a handful of Republican senators to accuse the US government of running “Operation Choke Point 2.0”. The term, coined by crypto venture capitalist Nic Carter, refers to an alleged coordinated effort by regulators to crack down on the crypto industry by taking out banking infrastructure. It has also made surviving banks – and their new crypto customers – reticent to talk about their business relationships lest they become a target as well. “They’re all getting banks, but nobody wants to announce it because of Operation Choke Point Part Two,” said the person at the crypto VC firm, referring to the portfolio companies. “We ask them to check a diverse set of boxes: They should have a regional partner, they should have a norm bank like Citi or Bank of America, and they should try if they can have a prestigious brand like JPMorgan or Goldman. “

JPMorgan’s new work with crypto-related companies is particularly notable as the bank’s CEO Dimon has often — and famously — called bitcoin a “fraud,” including as recently as January, when he also referred to it as “a pet rock.” In 2020, JPMorgan began tapping two leading bitcoin exchanges, Coinbase and Gemini, in its first attempt at crypto clients, The Wall Street Journal reported at the time. But just last week, JPMorgan cut ties with Gemini, according to Reuters, even though Gemini, which is led by Cameron and Tyler Winklevoss, denied the report.

A person close to the bank says JPMorgan remains very picky about its clients, and businesses that issue digital tokens are usually taboo. But other companies in the crypto world could still be accepted. “It really comes down to, ‘Are you primarily a crypto company, is that your primary business, are you exposing us to more volatility in some way?'” the person says.

“Among tier-one banks, none are crypto-friendly right now, that’s a reality,” says one person at a large US-based crypto firm with several banking partners, noting that banks have different restrictions, which can change daily . basis. “The trick is that banks won’t refuse a lot of money if they get a lot of money. But they also consider how risky your business is.”

The major banks’ historical rejection of crypto-company deposits has long been a problem for startups, which still need traditional bank accounts to run their businesses and do things like rent office space and pay employees. “Crypto companies have struggled with access to banking services since the earliest days of the industry,” said Meltem Demirors, chief strategy officer of CoinShares, a digital asset investment firm. Cryptocurrency firms have grown accustomed to their banks suddenly changing their minds about them depending on bitcoin’s public perception: Even Silicon Valley Bank dropped Coinbase and other crypto companies as clients around 2015, though it was still working with some firms in the industry when it closed last week .

The closing of Signature Bank, in particular, came as a surprise — including board member and former congressman Barney Frank, who told me he believes the government took over the bank because “they don’t want banks doing crypto.”

For the crypto industry, the banking shake-up is yet another existential hurdle in a series of recent setbacks, including a bear market and FTX-fueled contagion. “We had the same situation back in the early days of crypto, when whether or not you could get a bank relationship determined whether you lived or died,” Carter says. “And we’re going back to it now.”