Crypto firms scramble for banking partners as willing lenders dwindle
LONDON: Crypto firms have been left scrambling to find banking partners after the collapse of three crypto-friendly lenders in the US last month, creating a risk their business will become concentrated in smaller financial institutions.It is a scenario that concerns US regulators, who have expressed doubt about the safety and soundness of bank business models that are highly focused on crypto clients after Silvergate Capital Corp, Signature Bank and Silicon Valley Bank imploded.US regulators have also told banks to be alert for liquidity risks coming from crypto-related deposits, which could be subject to rapid outflows if customers try to redeem their crypto assets for real money.Mainstream banks have become increasingly wary of crypto clients following a series of high-profile collapses, including the bankruptcy of major exchange FTX in November last year, and a lack of regulation."Crypto and Web3 start-ups are telling us they simply cannot get a business bank account," said Marcus Foster, head of crypto policy at Coadec, a body representing UK start-ups.
Foster said the issue has become "significantly worse" recently.This has left digital asset companies with little choice but to seek out smaller financial institutions, some in remoter corners of global finance.A spokesperson for FV Bank, a US-licensed fintech-focused bank in Puerto Rico, said that it has seen an uptick in inquiries from potential customers in recent weeks, even though it is not insured by the Federal Deposit Insurance Corp.
The bank does not lend and is therefore not subject to the same type of risks as traditional banks that operate on a fractional reserve system, a spokesperson said.In Liechtenstein, a spokesperson for Bank Frick said it has also
