A total of five crypto companies ended their partnership with Silvergate Bank on March 2 after a series of lawsuits and investigations against the bank.
The popular fintech bank Silvergate Bank lost five crypto partners on March 2, owing to a slew of investigations and lawsuits against it.
Coinbase, Paxos, Gemini, BitStamp and Galaxy Digital were some of the most notable crypto firms that were using Silvergate as their banking partner. However, the termination of service by Coinbase has also forced a crypto hedge fund to look for an alternate banking partner.
Today Silvergate has lost
Coinbase
Circle
Paxos
Galaxy
CBOERIP https://t.co/XlexB5u2wD
— db (@tier10k) March 2, 2023
On March 3, a crypto hedge fund called Digital Asset Capital Management (DACM) with assets worth over $400 million announced they are looking for a new banking partner in Switzerland post Silvergate chaos. DACM used Silvergate’s real-time network to move funds to and from Coinbase Global Inc.’s platform.
DACM chief in an interview with Bloomberg said that even though there are certain banks in the U.S. that can handle crypto transactions, they are not crypto-focused as Silvergate. He added that finding a new partner could take some time and they are “speaking to some Swiss banks.”
Switzerland was one of the first countries to regulate and offer banking licenses to crypto banks. SEBA Bank AG (formerly SEBA Crypto AG) is a fully-regulated institution, having secured a banking and securities dealer license from the Swiss Financial Market Supervisory Authority (FINMA) in August 2019.
Silvergate was popular with crypto companies because of its instant and real-time bank transfer services. Thus, it might take longer to move funds in absence of such facilities. Currently, in the U.S., Signature bank seems to be the next popular fintech bank of choice for crypto companies. Coinbase had already shifted its Prime customer’s banking transfers to the Signature bank.
Related: Binance banking problems highlight a divide between crypto firms and banks
The Signature Bank might be the next best choice for crypto firms at the moment, but the question is for how long? Earlier in December 2022, Signature Bank announced its intention to withdraw up to $10 billion in deposits from clients who hold digital assets, starting a general exodus from the cryptocurrency sector. The bank had already severed ties with Binance, discontinuing its SWIFT banking services for the crypto exchange.
While crypto companies have always found it difficult to find a banking partner due to the absence of clear regulations around the market, the Silvergate saga has raised the difficulty level of transferring cash to crypto exchanges.
