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Two months after the collapse of Silvergate Capital and Signature Bank, a new banking landscape for crypto companies is taking shape amid an expanding crackdown on the industry in the US.
In the US, crypto firms are turning to a handful of smaller regional lenders to open bank accounts. Customers Bancorp, a Pennsylvania lender, has become a popular destination. Swiss and Asian banks are also playing a bigger role, though they still remain selective about their crypto clients. In the UK, where access to banking has also worsened, companies are instead turning to payment-service providers to bridge the gap.
As a result, crypto’s new banking system is more fragmented, less US-centric and, at times, less advertised. Bloomberg News spoke to more than a dozen of industry participants, including banks, digital-asset exchanges, trading firms, startups and consultants to compile a list of banks globally that are receptive to clients in the sector.
The changes come as mainstream US banks became warier of processing wire transfers and holding deposits for the crypto industry, following last year’s turmoil and amid growing regulatory scrutiny. La Jolla, California-based Silvergate and New York-based Signature, two banks that supported the bulk of the industry’s money transactions, closed in March, setting off a scramble among crypto firms to find alternatives.
“Now it’s more of a handful of names, where you have to go and do your own due diligence because they are not as well-known, at least for the crypto community,” said Rich Rosenblum, president and co-founder of crypto trading firm GSR.
This week, the US Securities and Exchange Commission sued crypto exchanges Binance Holdings and Coinbase Global for breaking its rules, delivering a one-two punch against the biggest players in the industry. Both firms denied the allegations and vowed to defend themselves in the court.– Bloomberg
“These high-profile lawsuits call attention to different issues that have been widely discussed and acknowledged among industry participants,” such as the legal status of certain tokens, said John Popeo, partner at Gallatin Group, which advises banks and other firms on regulatory issues. “It could create additional challenges for firms to find banking partners, as these partners will engage in due diligence and look at the additional issues related to the firms.”
Crypto exchanges have historically had difficulties finding banking partners to store deposits and facilitate money transfers for the buying and selling of digital assets. Losing banking access means crypto would be further isolated from the traditional finance industry.
Banking access for crypto firms in the US has become worse than in the pre-2018 era, when digital assets was still a nascent industry, said J. Austin Campbell, adjunct professor of Columbia Business School, who runs an independent consulting business for crypto firms. Banks want to open operational accounts for corporate use without touching users’ money, “but that’s not enough to run the business,” he said.
Still, the rebuilding and stitching together of a crypto-banking system is slowly happening. One upside is that the diversification of banking-service providers means the new system could be more resilient. While banking isn’t as seamless as it was a year ago, should one of today’s banks stop supporting crypto, “you wouldn’t have this rejiggering of the system,” Rosenblum said.Bloomberg
leeroy
Online Reporter