Original compilation: Leo, BlockBeats
Original compilation: Leo, BlockBeats
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Don't want to be defined as a crypto bank
Crypto companies need banks to operate, but the status quo is that it is getting harder and harder to find a crypto-friendly bank.
In recent years, the encryption industry has been booming. Many small banks have embraced the skyrocketing crypto industry, ignoring its risks. With the FTX storm, Silvergate Bank is crumbling, and Signature Bank is also reducing the encryption customers it cooperates with. Whether it is a bank or an encryption start-up company, it is in trouble.
For some crypto companies, whose customers require bank account remittances, they must transfer assets to banks that accept crypto, venture capital and crypto executives told The Information, and the most likely banks are Silicon Valley Bank. , Customers Bank and Mercury. But this is only for large crypto companies. For some small crypto startups, it is especially difficult to find a crypto-friendly bank due to lack of credit endorsement.
Sources told The Information that the closure of crypto-friendly banks will likely have negligible impact on large trading platforms and other established crypto firms, which are linked to multiple banks, including some mainstream banks, which may allow They increase deposits.
For example, Coinbase has a banking relationship with JPMorgan. (JPMorgan Chase has cut ties with Gemini, it was previously reported.) For crypto startups, the situation is very different. Where to turn has been a hot topic among VCs in recent weeks, one crypto VC told The Information. topic, their firm has been presenting on behalf of startups to other banking partners, including Silicon Valley Bank and Mercury.
But some encryption startups have been hit harder, and they may have to find more "niche" partners. Matthew Homer, a venture capitalist, advisor to blockchain startups, and former regulator of the New York State Department of Financial Services, said: "It's getting more and more difficult for smaller crypto startups to find new banking partners, and that's the frustrating point, they're going to be locked out. push to the second or third echelon".
Part of Silvergate's appeal to the crypto industry is its payments system, the Silvergate Exchange Network, which allows crypto companies and institutional investors to quickly send money to each other 24 hours a day, after the bank shut down its system last week.
An executive at an encryption trading firm said the company has been receiving calls from clients such as hedge funds and encryption firms, some of which have accounts with Silvergate, seeking advice on which crypto-friendly bank to turn to now, Silvergate Can you help me out.
While Signature Bank has emerged as an alternative to Silvergate, offering a similar payments network to Signet, it has shown little interest in more crypto businesses. In December, the company said it wanted to cut crypto-related deposits to less than 20% of total deposits, with an eventual goal of cutting them to less than 15%. The bank's crypto-related deposits fell by $7.4 billion in Q2 last year -- about $18 billion, or one-fifth of its total deposits.
Investor pressure drove the move at Signature, said Ian Sexsmith, chief portfolio manager and senior research analyst at Parnassus Investments, which owns about $150 million in the bank; another motive was the bank's other clients, such as Asset managers, law firms and healthcare providers are increasingly concerned about the bank's close ties to the crypto industry.
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Customers Bank
While a company like a crypto trading platform doesn't necessarily need to use a U.S. bank, having a Federal Deposit Insurance Co. backing is attractive to its clients. Customers Bank is a good choice for encryption companies. The bank has signed many large encryption customers in early 2021 and provides a payment system similar to the Silvergate network. According to people familiar with the matter, the company does not plan to exit the encryption industry.
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Silicon Valley Bank
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Cross River Bank
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Mercury
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Cooperation is possible, but not much
Silvergate has attracted deposits by catering to the crypto industry, which in turn gives them a cheap way to finance loans. But last week, Silvergate said it may be "undercapitalized", raising questions about its ability to continue as a going concern.
U.S. regulators have always been the "blockers" in front of encryption. Prior to this, the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued a joint statement on the liquidity risk caused by the fragility of the encrypted asset market, emphasizing the importance of entities related to encrypted assets. Liquidity risk for banking organizations linked to certain funding sources, with the regulator noting that the interconnectedness of the crypto industry exacerbates the risks faced by overexposed banks. And just days later, Metropolitan Commercial Bank said it would “completely withdraw” from the crypto industry.
Even those banks that have long accepted the reluctance of big banks to contact customers are becoming cautious. Ryan James, CEO of Florida-based Surety Bank, has been accepting and providing high-risk customers in areas such as encryption, Cannabis and payday loans for years. Serve.
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