In The Aftermath Of Failure, Crypto Companies Look For Banks Outside The US

Cryptocurrency companies are seeking banking services outside the United States after three large lenders failed.

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Marco Lim, the CEO of a crypto hedge fund, told Trade Algo on March 13, that "the two major crypto-friendly banks have closed down," referring to Signature Bank and Silvergate Capital, both of which operated in the blockchain asset space and were recently closed down.

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When Lim spoke with Trade Algo, he was in the midst of registering Hong Kong bank accounts in order to locate replacements for the Signature account that had been closed.

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“I've been through too many catastrophes,” said Lim, managing partner of MaiCapital.

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A run on deposits led to the bankruptcy of Silicon Valley Bank (SVB) this week, which regulators took over after a run on deposits led to the failures of Silvergate and Signature.

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Apparently, the collapse of Signature and Silvergate, which was reported in the Trade Algo study, is a particularly concerning development because the banks provided real-time, round-the-clock payment networks to the cryptocurrency sector.

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Because of the demise of the FTX exchange last year, cryptocurrency businesses are now turning to banks located in Switzerland and the United Arab Emirates, continuing a trend that was started when the United States increased its regulatory pressure following the collapse of the exchange.

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According to last week's report by PYMNTS, even before the Signature and SVB were blown up, the "crypto winter" of 2022 had already evolved into an ice age.

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New York Attorney General Letitia James pointed out in her lawsuit last week against KuCoin, which asserts that one of the current issues facing the cryptocurrency sector is the well-known cryptocurrency ether, there are many other issues that need to be addressed.

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The filing by James, according to PYMNTS, represents the first time in the history of the industry that a regulator has claimed in court that ether, one of the most valuable digital assets behind bitcoin's nominal value, is security. Ethereum has long been treated as a commodity by both state and federal regulators, including the Commodity Futures Trading Commission (CFTC).

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It was stated in the article that this and other actions have rocked the cryptocurrency markets in recent weeks. There was a significant change in the USDC stablecoin's link to the dollar over the weekend, continuing a trend that began earlier in the year.

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There is concern that Circle, the issuer of UDSC, has money in Silicon Valley Bank, which has contributed to the price drop of UDSC from 86 cents to 86 cents in recent weeks.

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The coin's value decreased as holders redeemed their tokens, and Circle has made it clear that 8% of the funds supporting USDC have been stored at Silicon Valley Bank, according to Coindesk.

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There was no way of knowing at that time the exact amount of the uninsured sum that would be recovered or when Circle would be able to do so. Due to the fact that Circle announced it would utilize corporate funds in order to replace any funds that could not be recovered from SVB, USDC started to slowly regain value and eventually climbed back to 97 cents once again.