Silvergate Bank, a major cryptocurrency lender, lost five partners on March 2 due to a series of investigations and lawsuits against it.
Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital were some of the most notable crypto companies using Silvergate as a banking partner.. However, Coinbase’s cessation of service has also forced a cryptocurrency hedge fund to look for an alternative banking partner.
Today Silvergate has lost
coinbase
Circle
Paxos
Galaxy
CBOERIP https://t.co/XlexB5u2wD
—db (@tier10k) March 2, 2023
On March 3, A cryptocurrency hedge fund called Digital Asset Capital Management (DACM), with assets worth more than $400 million, announced that it was looking for a new banking partner in Switzerland after the Silvergate chaos. DACM used Silvergate’s real-time network to move funds to and from the Coinbase Global platform.
In an interview with Bloomberg, DACM co-founder Richard Galvin said that while some US banks may handle crypto transactions, they are not as crypto-focused as Silvergate. He added that finding a new partner could take time, and that they are “talking to some Swiss banks.”
Switzerland was one of the first countries to regulate and offer banking licenses to crypto banks. SEBA Bank AG, for example, is a fully regulated institution that obtained a banking and securities dealer license from the Swiss Financial Market Supervisory Authority in August 2019.
Silvergate was popular among crypto businesses due to its real-time and instant bank transfer services. Therefore, moving funds in the absence of such facilities could take longer. In the United States, Signature Bank appears to be the next popular fintech bank of choice for crypto companies. Coinbase had already switched bank transfers from its major clients to Signature Bank.
Signature Bank might be the next best thing for crypto businesses, but the question is for how long? In December 2022, Signature Bank announced its intention to withdraw up to $10 billion in deposits from digital asset-holding customers, starting a general exodus from the cryptocurrency industry. The bank had already severed ties with Binance, discontinuing its SWIFT banking services for the exchange.
Although 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 level of difficulty of transferring cash to cryptocurrency exchanges.
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