Metropolitan Commercial Bank to leave crypto-boosting crisis
- New York Metropolitan Commercial Bank to stop crypto operations.
- The recent shutdown of crypto banks has created a crisis in the crypto industry.
Since the subsequent collapse of crypto-friendly banks in March 2023, the crypto industry has needed a strong banking partner in the United States. Further adding to the hardships faced by the industry, Metropolitan Commercial Bank closed its operations due to the current market scenario.
MCBank ends crypto operations
According to Metropolitan Commercial Bank’s (MCBank) April 18, 2023, SEC filing, crypto deposits were around $278.5 million. As of March 31, 2023, excluding the crypto customers, the bank’s total deposits were around $4.9 billion. Parent company Metropolitian Bank Holding announced in January 2023 to end crypto operations.
This decision closely follows the arrest of FTX’s former boss, Sam Bankman-Fried, who is facing trials for several financial crimes. The collapse of one of the leading crypto exchanges in the world was one black swan event in the crypto industry. It started a contagion effect that affected almost everyone directly or indirectly with FTX.
MCBank served four crypto clients, contributing 1.5% of total revenue, around $1 million. 6% of the bank’s total deposits came from them, about $342 million. These details were released in their filing for the third quarter of 2022.
Crypto Banking Scenario in the US
On March 8, 2023, Silvergate Bank voluntarily closed with assets of about $12 billion. Silicon Valley Bank came under the ownership of the Federal Deposit Insurance Corporation on March 10, 2023, with crypto assets of around $200 billion. At the same time, Signature Bank was banned by regulators on March 12, 2023, with around $100 billion in assets.
This unforeseen chain of events warned US banks against getting involved in crypto. However, BYN Melon still serves crypto clients, taking a slow approach. Provident Bancorp blamed the harsh crypto winter of 2022 as the root cause of the current banking crisis.
On April 18, 2023, co-CEOs Joe Reilly and Carol Houle wrote a letter to shareholders about the closure of crypto-friendly banks and how they shook the banking industry to its core. They claimed that the situation followed the crypto downturn and affected several businesses, including those supported by Provident through its digital lending initiatives.
The current scenario has caused many crypto entities operating in America to move offshore. This decision also applies to the ambiguous regulatory scenario in the country. Moreover, the continuous closure of these crypto-friendly banks created a banking crisis that many related to the Lehman Brothers crisis of 2008. This was said to be a significant event that started the global recession.
The crypto industry can only function optimally with a good banking partner. This partnership helps exchanges accept fiat deposits in return for their services or tokens. They would need banks to pay their employees and suppliers etc. The main concept behind crypto was to build a parallel financial system without intermediaries, but paradoxically they depend on Banks.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional money exchange systems. She is also fascinated by blockchain technology and its function.
