Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital, terminated their partnership with Silvergate Bank
On March 2, five prominent crypto firms, including Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital, terminated their partnership with Silvergate Bank due to a series of investigations and lawsuits against the bank. Silvergate Bank, which is a prominent lender to crypto firms, lost these partners, leading to concerns about the ease of moving funds to and from crypto exchanges.
One of the most significant consequences of this termination was felt by Digital Asset Capital Management (DACM), a crypto hedge fund with assets worth over $400 million. DACM used Silvergate’s real-time network to move funds to and from Coinbase Global’s platform. Following the termination, DACM announced that it was looking for a new banking partner in Switzerland.
In an interview with Bloomberg, DACM co-founder Richard Galvin said that while some banks in the United States can handle crypto transactions, they are not as crypto-focused as Silvergate. Finding a new partner could take time, and they are currently “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 Bank’s instant and real-time bank transfer services were popular among crypto companies, making the transfer of funds faster and easier. In the absence of such facilities, moving funds to and from crypto exchanges might take longer. In the U.S., Signature Bank appears 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.
However, Signature Bank might not be the best long-term option for crypto firms. 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.