Every 3.12 is worthy of commemoration in the encryption world.
Last Wednesday, Silvergate Capital announced the end of operations and final liquidation; last Friday, SVB (Silicon Valley Bank) announced its bankruptcy after suffering a $42 billion run; and on March 12, Signature Bank was directly closed by regulators.
Affected by this series of violent attacks, Bitcoin fell below $20,000 at the lowest level, while USDC suffered short-term “anchoring” fluctuations. After the introduction of emergency rescue measures, the overall market has recovered, but a more severe test has come.
More and more banks will stay away from the encryption market under the double pressure of market fluctuations and tightening regulations. As an important channel for deposits and withdrawals, what are the current encryption-friendly banks in the United States?
Either collapse in FTX, or survive SVB
The United States was once the most tolerant economy for crypto banks. The Block once summarized a list of crypto-friendly banks in 2020, including top banks such as JPMorgan Chase, as well as traditional banks such as Silvergate Capital and Signature Bank. community retail bank.
But the collapse of FTX changed everything. In January 2023, the three banking regulators in the United States, the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) jointly issued a statement, hoping that banks should not participate Encryption-related businesses, and strictly review the compliance of each business.
In this context, several banks that are closely related to crypto businesses, especially FTX, have chosen to withdraw from the crypto market.
Crypto-friendly banks that are leaving
•JPMorgan
JPMorgan itself has launched the Onyx system, which allows for instant transfer and settlement of multi-bank, multi-currency assets on a permissioned distributed ledger. In February 2022, JPMorgan Chase launched Decentraland, becoming the first bank to set up services in the Metaverse. In addition, it also focuses on providing cryptocurrency payment services, such as cryptocurrency payment processing, blockchain technology solutions, etc.
However, in March 2023, JPMorgan Chase & Co. announced it was cutting ties with cryptocurrency exchange Gemini, which Gemini has since denied. Coinbase also stated that it will continue to cooperate with JPMorgan Chase.
• Metropolitan Bank Holding Corp
Choose to completely withdraw from the encryption market on January 9, 2023. Encryption business accounts for 1.5% of operating income, and encryption deposits account for 6% of total deposits. In 2023, the business relationship with the last four encryption customers will end.
Since 2019, Metropolitan Bank has claimed that it has not attracted new cryptocurrency customers, but hopes to retain the deposits of existing cryptocurrency customers. After the regulatory documents are issued, it is expected to completely withdraw from the cryptocurrency market.
• Moonstone Bank (Farmington State Bank)
As of January 2023, the bank has approximately dozens of cryptocurrency customers, and all crypto accounts have been de facto closed.
A year ago, in January 2022, Moonstone received an investment of $11.5 million from SBF’s Alameda Research. In the Bahamas, liquidators discovered that Moonstone held nearly $50 million in FTX deposits in two accounts, the status of which is currently unknown. Executives at Moonstone declined to provide investigators with details about the accounts, according to a December 2022 motion filed by Bahamian liquidators.
Currently, Moonstone announced that it is “returning to its original mission as a community bank and is ceasing to pursue an innovation-driven business model and no longer provides banking services to the crypto industry.”
• Provident Bank
The main body responsible for the encryption business of the bank is BankProv. Its business direction in the encryption field is mainly mining, and it provides services such as deposits, loans, wire transfers and ACH transfers, real-time payments, and remote deposits for encryption companies. Additionally, there is an API connection to BankProv for crypto businesses through the startup Treasury Prime.
By the end of 2022, its crypto mining loan portfolio will be reduced to $41.2 million, or a 50% drop, and the Q3 loss in 2022 will be $27.5 million. Therefore, BankProv will gradually withdraw from the crypto mining loan business.
• Evolve Bank & Trust
In addition to FTX’s “implication”, BlockFi also caused serious harm to Evolve Bank & Trust. Evolve previously issued credit cards for BlockFi’s clients and had some exposure to FTX.
Evolve stated that it did not provide loan services to FTX or its affiliates, nor did Evolve invest in or trade in cryptocurrencies.
In addition to the above four unsteady banks, there are still several really friendly banks that are advancing and retreating with the encryption industry.
Crypto-friendly banks that are still holding on
•The Bank of New York Mellon (Bank of New York Mellon)
Bank of New York Mellon is the world’s largest asset custody institution, currently custodying more than 43 trillion traditional assets, with a daily settlement of more than 2 trillion US dollars, and is the exclusive settlement agent for US government bonds.
In March 2022, the stablecoin USDC issuer chose Bank of New York Mellon as the custodian. After Signature is closed, Circle will use Bank of New York Mellon for settlement.
•Customers Bank
Customers Bank uses its self-developed CBIT token to exchange USD cash between customers. CBIT tokens can be used in conjunction with the TassatPay payment platform, which is a B2B instant transfer system based on blockchain technology.
Thanks to the real-time and security of blockchain transactions, banks can absorb and benefit from a large number of low-cost deposits, providing huge liquidity and expanding net interest margins to drive aggressive loan growth. The bank announced in its third quarter 2021 earnings report that $1.5 billion in deposits came from cryptocurrency operations.
After the FTX incident, Customers Bank announced that it has no deposits or other business dealings with FTX or any affiliated companies, nor has it provided loans to any customers in confidential industries.
After the collapse of SVB and Sinagture Bank, Circle, the USDC issuer, still has some reserves in Customers Bank.
•Cross River Bank
In April 2022, Cross River Bank completed a financing of US$620 million led by a16z. Its main business module is BaaS (Banking as a Service, Banking as a Service). The BaaS component covers payments, which include card swipes, account transfers, and real-time payments. Checking accounts, savings accounts, and credit and debit cards can be serviced.
Both Coinbase and Circle are its customers. Circle, after SVB, announced that starting March 13, 2023, Cross River Bank will provide customers with the service of minting and redeeming USDC.
•Pathward
Similar to Cross River Bank, it is also a bank that provides BaaS (banking as a service). It cooperates closely with Coinbase and is also a cooperative issuer of Coinbase Card, providing it with services related to credit card issuance.
Pathward is also an FDIC-registered bank that provides customers with deposit insurance services for deposits up to $250,000.
Indirect Access to Crypto-Friendly Banks
In addition to banks that directly provide services to crypto companies or customers, there is also a special banking system that contacts crypto companies indirectly or through cooperation.
•First Foundation Bank
First Foundation Bank has partnered with NYDIG to allow users to trade bitcoin through the app, where customers can buy, sell and hold bitcoin. But customers don’t really own any specific, on-chain, identifiable bitcoins, but rather a specific amount and interest reflected in a personal NYDIG bitcoin account.
At the same time, NYDIG transfers all customer bitcoin sales funds to the bank, and the bank bitcoin sales proceeds are deposited into the First Foundation Bank personal account of your choice to complete the transaction.
•Sutton Bank
Sutton releases support for CashApp and Prepaid Cards to indirectly support encryption services. However, according to the official statement, Sutton Bank is only the issuer of the card, and users can use the CashApp to use the funds in the card, but any historical records of funds in the APP cannot be queried through the online banking account.
Regarding Robinhood’s debit card (Debit Card), Sutton does not undertake any customer support functions, and Rboinhood sets up the card agreement entirely by itself.
•Quontic Bank
Quontic Bank uses Bitcoin as a form of rebate reward for swiping the full amount of the card. The user’s minimum deposit requirement is 500 US dollars, and 1.5% of the amount of each consumption will be accumulated in USD-denominated Bitcoin as a reward. But ATM withdrawals, transfers, bill payments, ACH payments, and wire transfers do not earn bitcoin rewards.
Conclusion: beyond the thunderstorm
This bank thunderstorm, in addition to affecting the US’s own banking system, has also caused a certain impact on the banking systems in other regions. Due to regulatory policies, not all banks can involve in US dollar services, but they have finally left a front line. Hopefully, the main ones will be some of the banks in Europe, especially Swiss banks, for example, SEBA and Sygnum, the two major crypto-friendly banks, and traditional large banks such as Vontobel, Swissquote, etc.
There are also a number of small European countries, such as LHV Pank in Estonia, Gorenjska Banka in Slovenia, Bank Frick in Liechtenstein, and BlueOrange Bank in Latvia.
And outlying island countries, such as Pacific Private Bank in Vanuatu, DeltecBank and Ansbacher in the Bahamas.
In general, the U.S. banking industry will usher in a large-scale turnaround. In 2020, the OCC (Office of the Comptroller of the Currency) once launched a payment charter, allowing encryption companies such as Kraken/Paxos to enter the national financial system.
After the FTX storm and the collapse of three banks last week, regulatory policies have preemptively intervened in the banking system. Whether banks will embrace crypto companies again in the future can only wait and see.