Crypto Travels the Globe for Banks to Replace Collapsed US Lenders

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(Bloomberg) – Crypto hedge fund executive Marco Lim spent Monday racing to open bank accounts in Hong Kong after three U.S. lenders suddenly collapsed.

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The hedge fund, MaiCapital, is based in the city and had liquidity in one of the fallen institutions, Signature Bank. MaiCapital needs alternatives and managing partner Lim was urging lenders to speed up account opening.

The two biggest crypto-friendly banks are gone, Lim said, referring to Signature and Silvergate Capital Corp., which also had many crypto clients and announced on Wednesday that they would be liquidated. I’ve been through too many crises.

Silvergate, Signature and Silicon Valley Bank have been knocked down in recent days amid bank runs, prompting the United States to introduce a new backstop to protect deposits. The loss of Silvergate and Signature is particularly serious for digital assets, as the two real-time, seven-day-a-week payment networks for the crypto industry facilitate the flow of money to and from the sector.

Many crypto firms are now looking for banks outside of the United States, with lenders in Switzerland and the United Arab Emirates among those in the spotlight. This tilt away from America had already begun due to the growing regulatory heat following the implosion of the Sam Bankman-Frieds FTX digital asset exchange.

The United States is not as accommodating as it used to be toward crypto, said Richard Galvin, co-founder of fund manager Digital Asset Capital Management in Sydney. It makes sense to diversify the grounds for jurisdiction.

Swiss Option

A Swiss bank is one of the lenders with which Digital Asset Capital Management is going through an integration process, Galvin said.

The story continues

In Switzerland, Sygnum Bank AG and SEBA Bank AG are among those working with the digital asset industry. Further, Deltec Bank & Trust Ltd. and Capital Union Bank in the Bahamas are also known for their focus on crypto.

SEBA Bank is seeing an increase in website traffic globally, but more in the United States, the company said in a statement, adding that crypto firms have requested accounts and calls are planned with many others interested parties.

For US-based companies like the Coinbase Global Inc. exchange, US banks remain essential. Coinbase on its website lists JPMorgan Chase & Co., Cross River Bank and Pathward among the institutions where it can deposit customer funds.

Circle Internet Financial Ltd., issuer of the second-largest stablecoin USDC, has just announced the upcoming automated minting and redemption of the token through Cross River Bank. Circle has licenses and registrations in the United States and had $3.3 billion in reserves backing USDC at Silicon Valley Bank.

Skeptical banks

One of the challenges for crypto firms is that banks are growing increasingly doubtful about the industry after a $2 trillion rout, a series of digital asset explosions and increased regulatory scrutiny.

There are banking services available, but the bar for entry has never been higher, said Jonny Caldwell, co-head of asset management at Trovio, which focuses on traditional and digital assets. Banks verify details to demonstrate the soundness of companies.

Caldwell said he was aware of several crypto funds that were looking for alternative banking partners in banks in the Middle East and Switzerland.

In the Middle East, Dubai has sought to attract investment with pro-crypto policies. Jurisdictions like Hong Kong and Europe have also become more attractive thanks to their regulatory efforts and friendlier governments. In the UK, BCB Group is looking to attract customers to its payment network for digital asset holdings.

I anticipate more crypto institutions will start exploring the Asian banking system, said Adrian Lai, founder of Newman Capital in Hong Kong, which manages a $50 million fund investing in web3. The term web 3 refers to a vision of a decentralized internet built around blockchains, the underlying technology of cryptos.

However, even if lenders such as Chinese banks in Hong Kong start taking on crypto accounts, it won’t be like Silvergate or Signature, where the digital asset industry was a key part of their operations, Lucy Gazmararian said. founder and managing partner of the venture capital fund. Capital of Token Bay.

Crypto was their core business, she said. We don’t have that in Asia that I know of.

–With help from Zheping Huang and Yueqi Yang.

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