With the loss of two major crypto-friendly banks in less than a week, crypto companies may find it harder to reach traditional banking partners, according to some in the crypto community.
On March 12, the Fed announced the closure of Signature Bank, citing "systemic risk," as part of "decisive action" to protect the U.S. economy. The bank was ordered to close on March 10, just days after Silicon Valley Bank closed.
A week ago, another crypto-friendly bank, Silvergate Bank, announced it would close its doors and enter voluntary liquidation on March 8. At least two of these banks are seen as important banking pillars of the crypto industry. Signature Bank had $88.6 billion in deposits as of Dec. 31, according to insurance filings.
Cryptocurrency investor Scott Melker, also known as "Wolf on Main Street," believes like many others who took to Twitter after the news that the collapse of the three big banks will leave crypto companies "basically on” with no banking options. “Silvergate, Silicon Valley, and Signature are all closed. Depositors will be whole, but there’s basically no one in the U.S. who can bank crypto companies,” he said.
Meltem Demirors, chief strategy officer at digital asset manager Coinshares, expressed similar concerns on Twitter, emphasizing that in just a week, “crypto in the U.S. is no longer bankable.” She noted that SEN and SigNet “are the most Challenging alternatives". Silvergate Exchange Network (SEN) and Signature Bank's 'Signet' is a real-time payments platform that allows commercial cryptocurrency customers to make real-time payments in U.S. dollars at any time. Their losses could mean that “crypto liquidity could be somewhat impaired,” according to comments from Castle Island Ventures’ Nic Carter in a CNBC report on March 12. Both Signet and SEN are key to companies’ access to fiat currency, he said, but hopes other banks will step up to fill the void.
Others believe the closure of the three firms will create room for another bank to fill the void.
Jake Chervinsky, head of policy at the Blockchain Association, a cryptocurrency policy promoter, said the bank closures would create a "massive gap" in the market for crypto-friendly banks. "There are many banks that could take this opportunity without taking the same risks as these three. The question is whether banking regulators will try to block it," he added.
Meanwhile, others say viable alternatives already exist. Mike Bucella, general partner at BlockTower Capital, told CNBC that many in the industry have turned to Mercury Bank and Axos Bank.
“Crypto banking in North America is a tough place to be in the short term,” he said. Ryan Selkis, CEO of blockchain research firm Messari, noted that the events shut down the “banking of cryptocurrencies” in less than a week and sounded a warning about USDC’s future.
“Next, USDC. The message from DC is clear: Crypto is not welcome here,” he said.
“From now on, the entire industry should be desperate to protect and promote USDC. This is the last stand for U.S. cryptocurrency,” Selkis added. Circle, the issuer of stablecoin USDC, confirmed on March 10 that a wire transfer initiated to transfer its balance at Silicon Valley Bank had not yet been processed, with $3.3 billion of its $40 billion USDC reserves remaining in SV.
The news sent USDC wobbling around its peg, at times dipping below 90 cents on major exchanges. However, as of March 13, USDC is recovering back to the $1 peg after USDC CEO Jeremy Allaire confirmed that its reserves are safe and the company has new banking partners lined up.
