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.
Silvergate Bank — a prominent lender to crypto firms — lost five partners on March 2 due to a slew of investigations and lawsuits against it.
Coinbase, Paxos, Gemini, BitStamp and Galaxy Digital were some of the most notable crypto firms 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
— db (@tier10k) March 2, 2023
Coinbase
Circle
Paxos
Galaxy
CBOE
RIP https://t.co/XlexB5u2wD
On March 3, a crypto hedge fund called Digital Asset Capital Management (DACM), with assets worth over $400 million, announced it was 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’s platform.
In an interview with Bloomberg, DACM co-founder Richard Galvin said that although certain banks in the United States can handle crypto transactions, they are not as crypto-focused as Silvergate. He added that finding a new partner could take 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, for example, is a fully-regulated institution that secured a banking and securities dealer license from the Swiss Financial Market Supervisory Authority in August 2019.
Silvergate was popular with crypto companies because of its instant and real-time bank transfer services. Thus, moving funds in the absence of such facilities might take longer. 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 Signature Bank.
Related: Binance banking problems highlight a divide between crypto firms and banks
Signature Bank might be the next best choice for crypto firms, but the question is for how long? In December 2022, Signature Bank announced its intention to withdraw up to $10 billion in deposits from clients holding 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.
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