Crypto-friendly banks’ collapse raises concerns in the crypto community

Problems at three banks — Silvergate Bank, Signature Bank and Silicon Valley Bank (SVB) — have raised concerns in the crypto community about the fate of companies tied to the industry.

Silvergate, Silicon Valley and Signature all shuttered.

Depositors will be made whole, but there’s basically nobody left to bank crypto companies in the US.

— The Wolf Of All Streets (@scottmelker) March 12, 2023

“Depositors will be made whole, but there’s basically nobody left to bank crypto companies in the US,” wrote The Wolf Of All Streets host Scott Melker.

Meltem Demirors, chief strategy officer at CoinShares, expressed similar concerns. She stressed that “crypto in the US has basically lost all banks in a week.”

and just like that, crypto in america has been unbanked

Silvergate. Silicon Valley Bank. Signature.

in one week pic.twitter.com/nWLDxdOAAA

— Meltem Demirors (@Melt_Dem) March 12, 2023

Crypto investor and blogger Lark Davis noted that Signature Bank was “the last big bank” that served companies tied to digital assets.

Umm… so they shut down Signature bank…

Wasn’t that like one of the last big banks working with #crypto companies?

Guys? Guys…

— Lark Davis (@TheCryptoLark) March 13, 2023

Against the backdrop of turmoil in the U.S. banking sector, Castle Island Ventures cofounder Nick Carter forecast a potential liquidity squeeze in the market. In an interview with CNBC he said that the payment rails SEN and Signet had been a key source of fiat for many firms.

Jake Chervinsky, Head of Policy at the Blockchain Association, noted that the closures of financial institutions create “a huge gap” in the crypto market.

The closures of Silvergate, SVB, and Signature create a huge gap in the market for crypto-friendly banking.

There are many banks that can seize this opportunity without taking on the same risks as these three.

The question is if banking regulators will try to stand in the way.

— Jake Chervinsky (@jchervinsky) March 12, 2023

“There are many banks that can take advantage of this opportunity without taking on the same risks as these three. The question is whether regulators will try to stand in their way,” he added.

Mike Bucella, managing partner at BlockTower Capital, told CNBC that many in the industry are already moving to Mercury Bank and Axos Bank.

“In the near term, crypto‑banking in North America will be a tough test. Yet there is a long list of candidate banks that could fill this gap,” he explained.

Commenting on the SVB situation, Changpeng Zhao, CEO of Binance, weighed in but later deleted his tweet. According to a screenshot, he questioned whether rescue of troubled financial institutions was necessary—arguing such help reduces the incentive to manage risk.

Messari CEO Ryan Selkis also expressed concern about the future of the stablecoin USDC.

The entire industry should be fighting like hell to protect and promote USDC from here on out. It’s the last stand for crypto in the US.

— Ryan Selkis ? (@twobitidiot) March 12, 2023

“From this moment, the entire industry must fight hard to protect and promote USDC. This is the last stand for crypto in the United States,” he noted.

Peter Schiff, chief executive of Euro Pacific Capital, argued that the ФРС recognised how fragile the economy was and that the SVB collapse would trigger a financial crisis.

The #Fed knows the #economy is so fragile that the failure of #SVB would cause a financial crisis. So it abandoned its #inflation fight and backstopped the banks instead. That proves #Powell was lying about both the strength of the U.S. economy and his resolve to fight inflation.

— Peter Schiff (@PeterSchiff) March 13, 2023

“This proves that [Powell] lied about both the strength of the U.S. economy and his commitment to fighting inflation,” Schiff stressed.

Against the backdrop of SVB’s collapse, the stablecoin USDC and algorithmic stablecoins DAI and FRAX lost their peg to the dollar. On March 13, the USD Coin issuer Circle reassured that it had addressed the issues with custodial banking for the asset.

Earlier, Ripple CEO Brad Garlinghouse noted the company’s financial stability despite Silicon Valley Bank’s troubles.