According to some members of the crypto community, it may be harder for crypto companies to access traditional banking partners after losing two major crypto-friendly banks in less than a week.
On March 12, the Federal Reserve announced the closure of Signature Bank as part of “firm action” to protect the U.S. economy, citing “systemic risk.” This comes just days after the US bank, Silicon Valley Bank, was ordered closed on March 10.
A week earlier, Silvergate Bank, another cryptocurrency-friendly bank, announced it would close its doors and go into voluntary liquidation on March 8.
At least two of these banks were seen as important banking pillars for the crypto industry. According to insurance documents, Signature Bank had $88.6 billion in deposits as of December 31.
Umm… so they closed Signature Bank…
Wasn’t that one of the last big banks he worked with #crypto companies?
— Lark Davis (@TheCryptoLark) March 13, 2023
Crypto investor Scott Melker, aka The Wolf Of All Streets – like many others who took to Twitter after the news – believes that the collapse of the three banks will leave crypto companies “basically” without banking options.
“Silvergate, Silicon Valley and Signature all closed. Depositors will be healed, but basically there is no one left to bank crypto companies in the US,” he said.
Silvergate, Silicon Valley and Signature all closed.
Depositors will be healed, but basically there is no one left to bank crypto companies in the US.
— The Wolf of All Streets (@scottmelker) March 12, 2023
Meltem Demirors, chief strategy officer at digital asset management company Coinshares common similar concerns on Twitter, highlighting that in just one week, “America’s crypto has been unlocked.” She noted that SEN and SigNet “are the hardest to replace”.
and just like that, cryptocurrencies in America were unlocked
Silvergate. Silicon Valley Bank. Signature.
in one week pic.twitter.com/nWLDxdOAAA
— Meltem Demirors (@Melt_Dem) March 12, 2023
The Silvergate Exchange Network (SEN) and Signature Bank’s “Signet” were real-time payment platforms that allowed commercial crypto customers to make real-time dollar payments at any time.
Their loss could mean that “crypto liquidity may be somewhat impaired,” according to comments by Castle Island Ventures’ Nic Carter in a March 12 CNBC report. He noted that both Signet and SEN were crucial for companies to get fiat, but he hopes other banks will step up to fill the void.
Others believe the closure of three companies will make room for another bank to step up and fill the vacuum.
Jake Chervinsky, head of policy at the Blockchain Association, a promoter of crypto policy, said that closing banks would create a “huge gap” in the cryptocurrency-friendly banking market.
Silvergate, SVB and Signature closures create a huge gap in the cryptocurrency-friendly banking market.
There are many banks that can take advantage of this opportunity without taking the same risks as these three.
The question is whether bank regulators will try to stand in the way.
— Jake Chervinsky (@jchervinsky) March 12, 2023
“There are many banks that can take advantage of this opportunity without taking the same risks as these three. The question is whether bank regulators will try to stand in the way.”
Meanwhile others have he suggested viable alternatives already exist.
It’s not true. United Texas Bank, Western Alliance Bank, JP Morgan Chase and Bank of New York Mellon all have crypto companies as clients, and there are probably more. https://t.co/Q27bkzq2n8
— yuga.eth (@yugacohler) March 13, 2023
Mike Bucella, a principal partner at BlockTower Capital, told CNBC that many people in the industry are already switching to Mercury Bank and Axos Bank.
“In the near term, crypto banking in North America is a tough place to be,” he said.
“However, there is a long tail of challenger banks that could take that slack.”
Ryan Selkis, CEO of Messari, a blockchain research firm, recorded Incidents Shut Down ‘Crypto Banking Rails’ in Less Than Week, With Future Warning for USDC
“Come on USDC. The message from DC is clear: cryptocurrencies are not welcome here,” he said.
“The entire industry should fight like hell from now on to protect and promote the USDC. This is the last bastion of cryptocurrencies in the US,” added Selkis.
Crypto bank rails have been successfully shut down in less than a week. Come on USDC.
The message from DC is clear: cryptocurrencies are not welcome here.
— Ryan Selkis (@twobitidiot) March 12, 2023
USDC stablecoin issuer Circle confirmed on March 10 that transfers initiated to clear balances have yet to be processed, leaving $3.3 billion of its $40 billion USDC reserves at Silicon Valley Bank (SVB).
Related: The Fall of Silicon Valley Bank: Everything That Has Happened So Far
The news prompted the USDC to swing its course, sometimes falling below 90 cents on major exchanges.
However, as of March 13, the USDC returns to $1 following CEO Jeremy Allaire’s confirmation that its reserves are safe and the company has new banking partners.