Prominent members of the crypto community have expressed uncertainty following the loss of bank-friendly crypto.
Crypto companies may find it harder to gain access to traditional banking firms with the loss of two major crypto-friendly banks in less than a week, according to some crypto communities.
On March 12, the Federal Reserve announced the closure of Signature Bank as part of “decisive action” to protect the US economy, citing “systemic risks”. It comes just days after the closure of Silicon Valley Bank, which was ordered to close on March 10.
A week earlier, Silvergate Bank, another crypto-friendly bank, announced that it would close its doors and go into voluntary liquidation on March 8.
At least these two banks are considered important banking pillars for the crypto industry. According to insurance filings, Signature Bank had $88.6 billion in deposits as of December 31.
Crypto investor Scott Melker, also known as The Wolf Of All Streets, believes – like many others who took to Twitter after the news – that the collapse of the three banks will leave crypto companies “essentially” without banking options.
“Silvergate, Silicon Valley and Signature are all closed. Depositors will do everything, but there is really nothing left to the crypto bank companies in the US,” he said.
Meltem Demirors, chief strategy officer of digital asset manager Coinshares, shared a similar problem on Twitter, stressing that in just one week, “crypto in America has been unbanked”. He said SEN and SigNet were “the hardest to replace”.
Silvergate Exchange Network (SEN) and “Signet” Signature Bank is a real-time payment platform that allows crypto clients to make real-time payments in dollars at any time.
The loss could mean that “crypto liquidity could be somewhat reduced,” according to comments from Castle Island Ventures’ Nic Carter in a March 12 CNBC report. He said both Signet and SEN were key for the company to enter, but he hoped other banks would step in to fill the void.
Others believe that the closure of the three companies will make room for another bank to step up and fill the void.
Jake Chervinsky, head of strategy at the Blockchain Association, said the closure of the bank would create a “huge gap” in the market for crypto-friendly banking.
“There are many banks that can take this opportunity without taking the same risk as these three.” The question is whether banking regulators will try to block it,” he added.
Meanwhile, others have suggested that there are already viable alternatives out there.
Mike Bucella, principal at BlockTower Capital, told CNBC that many in the industry have switched to Mercury Bank and Axos Bank.
“Right now, crypto banking in North America is a tough place to be,” he said.
“However, there is a long tail of challenging banks that can pick up the slack.
Ryan Selkis, CEO of blockchain research firm Messari, noted that the incident saw “Crypto’s banking line” Off in less than a week, with a warning about the future of USDC.
“Next, USDC. The message from DC is clear: crypto is not welcome here,” he said.
“The entire industry must fight like hell to protect and promote USDC from now on. It’s the last stand for crypto in the US,” Selkis added.
Circle, the issuer of the stablecoin USDC, confirmed on March 10 that the wire initiated to transfer its deposit in Silicon Valley Bank has not been processed, leaving $ 3.3 billion of the $ 40 billion USDC reserve in SV.
Related: Silicon Valley’s Bank Collapse: Everything That Has Happened So Far
The news sent USDC reeling against its peg, falling below 90 cents at times in the main exchanges.
However, on March 13, USDC rose back to the $1 stake after confirmation from CEO Jeremy Allaire that the reserves were safe and the company had a new banking partner.