Popular fintech Silvergate Bank lost five crypto partners on March 2, due to a series of investigations and lawsuits filed against it.
Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital were some of the most prominent crypto companies 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 alternative banking partner.
Today Silvergate lost
– dB (@tier10k) March 2, 2023
On March 3, a crypto hedge fund called Digital Asset Capital Management (DACM) with more than $400 million in assets announced it was looking for a new banking partner in Switzerland after the Silvergate mess. DACM used the Silvergate real-time network to move funds to and from the Coinbase Global Inc. platform.
The DACM head said in an interview with Bloomberg that while there are certain banks in the US that can handle crypto transactions, they are not as focused on crypto as Silvergate. It may take some time to find a new partner, he added, and they are “talking to some Swiss banks”.
Switzerland was one of the first countries to regulate and offer banking licenses for crypto banks. SEBA Bank AG (formerly SEBA Crypto AG) is a fully regulated institution, having been awarded a banking and securities dealer license by the Swiss Financial Market Supervisory Authority (FINMA) in August 2019.
Silvergate has been popular with cryptocurrency companies due to its fast and instant bank transfer services. Thus, it may take longer to transfer money if there are no such facilities. Currently, in the US, Signature Bank appears to be the next favorite fintech bank for crypto companies. Coinbase has already wired bank transfers for its Prime customers to Signature Bank.
Related: Binance’s banking problems highlight the gap between crypto companies and banks
Signature Bank might be the next best option for crypto companies right now, 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 customers who hold digital assets, starting a public exodus from the cryptocurrency sector. The bank had already severed ties with Binance, stopping SWIFT banking services to the cryptocurrency exchange.
While cryptocurrency companies have always found it difficult to find a banking partner due to the lack of clear regulations around the market, the Silvergate saga has raised the “difficulty bar” in transferring cash to cryptocurrency exchanges.