Crypto companies could find it harder to access traditional banking partners with the loss of two major crypto-friendly banks in less than a week, according to some in the crypto community.
On March 12, the Federal Reserve announced the closure of Signature Bank as part of “decisive actions” to protect the U.S. economy, citing “systemic risk.” It came only days after the closure of Silicon Valley Bank, which was ordered to shut down on March 10.
A week prior, Silvergate Bank, another crypto-friendly bank, announced it would close its doors and voluntarily liquidate 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 Dec. 31.
Umm… so they shut down Signature bank…
Wasn’t that like one of the last big banks working with #crypto companies?
— Lark Davis (@TheCryptoLark) March 13, 2023
Crypto investor Scott Melker, also known as The Wolf Of All Streets, believes — like many others who took to Twitter following the news — that the collapse of the three banks will leave crypto companies “basically” without banking options.
“Silvergate, Silicon Valley and Signature all shuttered. Depositors will be made whole, but there’s basically nobody left to bank crypto companies in the US,” he said.
Silvergate, Silicon Valley and Signature all shuttered.
Depositors will be made whole, but there’s basically nobody left to bank crypto companies in the US.
— The Wolf Of All Streets (@scottmelker) March 12, 2023
Meltem Demirors, chief strategy officer of digital asset manager Coinshares, shared similar concerns on Twitter, highlighting that in just one week, “crypto in america has been unbanked.” She noted that SEN and SigNet “are the most challenging to replace.”
and just like that, crypto in america has been unbanked
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 clients to make real-time payments in dollars at any time.
Their loss could mean that “crypto liquidity could be somewhat impaired,” according to comments from Nic Carter of Castle Island Ventures in a March 12 CNBC report. He said that both Signet and SEN were key for firms to get fiat in, but hoped that other banks would step up to fill the void.
Others believe the closure of the three firms will create room for another bank to step up and fill the vacuum.
Jake Chervinsky, head of policy at crypto policy promoter the Blockchain Association, said the closure of the banks would create a “huge gap” in the market for crypto-friendy banking.
The closures of Silvergate, SVB, and Signature create a huge gap in the market for crypto-friendly banking.
There are many banks that can seize this opportunity without taking on the same risks as these three.
The question is if banking regulators will try to stand in the way.
— Jake Chervinsky (@jchervinsky) March 12, 2023
“There are many banks that can seize this opportunity without taking on the same risks as these three. The question is if banking regulators will try to stand in the way,” he added.
Meanwhile, others have suggested there are already viable alternatives out there.
This is false. United Texas Bank, Western Alliance Bank, JP Morgan Chase, and Bank of New York Mellon all have crypto businesses as customers, and there are probably more. https://t.co/Q27bkzq2n8
— yuga.eth (@yugacohler) March 13, 2023
Mike Bucella, General Partner at BlockTower Capital, told CNBC many in the industry are already changing to Mercury Bank and Axos Bank.
“Near-term, crypto banking in North America is a tough place,” he said.
“However there is a long tail of challenger banks that may take up that slack.”
Ryan Selkis, CEO of blockchain research firm Messari, noted the incidents have seen “Crypto’s banking rails” shuttered in less than a week, with a warning of the future for USDC.
“Next up, USDC. The message from DC is clear: crypto is not welcome here,” he said.
“The entire industry should be fighting like hell to protect and promote USDC from here on out. It’s the last stand for crypto in the US,” Selkis added.
Crypto’s banking rails have been effectively shuttered in less than a week. Next up, USDC.
The message from DC is clear: crypto is not welcome here.
— Ryan Selkis (@twobitidiot) March 12, 2023
Circle, the issuer of the stablecoin USDC, confirmed on March 10 that wires initiated to move its balances at Silicon Valley Bank had not yet been processed, leaving $3.3 billion of its $40 billion USDC reserves at SV.
Related: Silicon Valley Bank collapse: Everything that’s happened until now
The news prompted USDC to waver against its peg, dropping below 90 cents at times on major exchanges.
However, as of March 13, USDC was climbing back to its $1 peg following confirmation from CEO Jeremy Allaire that its reserves are safe and the firm has new banking partners lined up.