Operator of Stablecoin Transfers $1 Billion in Reserves to Bahamas

Following the failure of numerous crypto-friendly lenders in the US, the operator of the fifth-largest stablecoin in the world has shifted $1 billion in assets backing the token to an institution in the Bahamas. This move comes as digital asset firms continue to look for other homes for their funds.

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A real-time verification by an independent accountancy firm on Wednesday revealed that Archblock, which manages the almost $2 billion in reserves supporting its TrueUSD stablecoin, now holds and over $1.4 billion of those assets with Nassau-based Capital Union Bank. 

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The previous high was $438 million on March 10. As New York-based Signature Bank, formerly its biggest banking partner, was abruptly shut down by US regulators two days later, Archblock began shifting money. The attestation revealed that it had no money with Signature Bank right now.

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Digital tokens called "stablecoins," like TrueUSD, are intended to maintain a 1:1 value compared to a less volatile asset, like as the US dollar, often by keeping sizable reserves of cash and assets with a high cash equivalent as security. As some of the most traded tokens in the cryptocurrency industry, they are frequently utilized by traders as a means of transferring money between platforms and as a refuge from price fluctuations, making them an essential part of the system.

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According to Alex de Lorraine, chief finance and operating officer of Archblock, the decision to transfer cash to Capital Union in recent times was brought on by deteriorating banking conditions for cryptocurrency businesses in the US. He stated in a message late Tuesday that it was extremely difficult to obtain operational accounts, even only to pay taxes, manage payroll, and pay costs.

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Stress in US Banks

Silvergate Bank, Silicon Valley Bank, and Signature Bank all were closed by US regulatory agencies or wound down voluntary basis this month. As a result, many digital-asset companies were left scrambling to find new ways to park their own cash and allow customers to transfer funds after the failure of banking institutions in quick succession. After disclosing it had $3.3 billion deposited with Silicon Valley Bank, Circle Internet Finance Ltd., another stablecoin provider, saw its USD Coin token suddenly lose its dollar peg.

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Lenders have always found it difficult to work with cryptocurrency companies because of the industry's reputation for inadequate know-your-customer and anti-money trafficking regulations.

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According to de Lorraine, the recent bank failures only serve to underline the concentration danger that was brought about by unclear laws. If businesses like ours had been permitted to bank with Citi or JPMorgan, "I doubt you would've witnessed anything like the volatility in the last 72 hours." 

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According to images of its attestations taken by data analytics company ChainArgos on Monday, Archblock had much more than $852 million placed with Signature Bank and another $202 million was already on its way to Capital Union. The moves were confirmed by Archblock. A attempt for comment from a Capital Union representative went unanswered.

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Treasuries that are due soon

Concerns about cryptocurrency companies moving abroad have grown among US officials and some industry leaders because it puts them further out of the reach of law enforcement. Many saw the November collapse of the cryptocurrency exchange FTX as evidence of this issue because a large portion of the group's operations were conducted via its international organization in the Bahamas.

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A well-known partner for cryptocurrency firms, Capital Union Bank allows customers to deposit and conduct transactions in digital assets in the same accounts as currencies or assets. According to a 2017 Financial Times investigation, the company is one of Tether Holdings Ltd.'s financial partners and a stablecoin issuer.

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We transferred monies to Capital Union Bank primarily to secure funds since we can invest right now in extremely short-term US Treasury bonds, which is amusing in and of itself, de Lorraine remarked. The monies are in the US, but in order to accomplish that, we must use an offshore bank.

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After New York regulators ordered the closure of rival stablecoin BUSD, a cryptocurrency marketed by the largest exchange in the world Binance, in February, TrueUSD's circulation has more than doubled. On Wednesday, Binance announced that it would switch from a zero-fee trading system for Bitcoin purchased with BUSD to TrueUSD, greatly enhancing its growth potential.

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Nonetheless, the stablecoin industry is still quite unbalanced and dominated by a small number of players. According to data from CoinGecko on Wednesday, Tether's USDT is by far the most popular with $74 billion in circulation, followed by Circle's USDC with $38 billion. 

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Techteryx Ltd., the ultimate parent company of TrueUSD, acquired the asset's intellectual property rights from Archblock in late 2020. Nonetheless, through its wholly-owned subsidiary TrueCoin LLC, Archblock continues to run and oversee TrueUSD on Techteryx's behalf.

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