Crypto-Supportive Banks in US Face Financial Troubles, Prompting Firms to Turn to Potential Alternatives

With crypto-supportive banks in the United States experiencing financial troubles, cryptocurrency firms are turning to banks in Switzerland for a financial lifeline. Banks in Switzerland have reported an uptick in traffic from the United States, with crypto firms and other money managers already beginning the onboarding process. The country’s Arab Bank has seen increased interest from crypto venture capital businesses since early March when doubts around Silvergate’s finances began to circulate.

Silvergate, Signature Bank, and Silicon Valley Bank (SVB) have been a central lifeline for US crypto businesses including Coinbase, Bitstamp, CryptoCom, and FTX. However, some firms pivoted to Signature Bank following the liquidation of Silvergate last week, only for regulators to seize upon the latter days later.

Stablecoin issuer Circle had part of its USDC reserves across Silvergate, Signature, and SVB. However, the firm has since transferred all assets to Bank of New York Melon.

Certain crypto industry leaders and policymakers suspect that the sudden death of major crypto banks in the United States is not a coincidence, but a deliberate government attempt to drive the industry from its borders. Republican Congressman Tom Emmer wrote into the FDIC questioning if the agency had abused its authority to pressure banks not to serve crypto companies. Additionally, Signature Bank board member and former House member, Barney Frank, claimed that there was “no objective reason” to close down Signature besides sending a “strong anti-crypto message” to other banks.

In contrast, other industry leaders believe the situation is a natural result of the industry’s growth and the banks’ inability to keep up with it. The lack of regulatory clarity and the potential risks associated with serving crypto firms may have played a role in their decision to step back.

Swiss banks have emerged as a potential alternative for crypto firms due to their more crypto-friendly regulations and policies. However, these banks also face regulatory hurdles in the United States, as onboarding US clients remains difficult due to strict regulatory measures. Swiss banks are also limited in the number of firms they can absorb due to regulatory issues.

The situation with US banks has also highlighted the importance of decentralization in the crypto industry. Relying on centralized institutions such as banks for financial support and stability can be risky, as the recent events have shown. As a result, more crypto firms may turn to decentralized finance (DeFi) solutions in the future to avoid such risks.

Overall, the financial troubles facing crypto-supportive banks in the United States have caused uncertainty in the industry. While some firms have turned to banks in Switzerland as an alternative, others question if the situation is a deliberate attempt to push the industry out of the country. Regardless of the reasons, the events have highlighted the importance of decentralization and the need for more regulatory clarity and understanding in the crypto industry.