Banking Crisis in U.S. Likely to Push Crypto Firms Offshore
U.S. crypto firms are looking for bank accounts offshore following the collapse of three of the most digital assets friendly financial institutions last week.
Sygnum in Switzerland and Bank Frick in Lichtenstein told CoinDesk that they have seen an increase in requests to open accounts in the past few days, from various jurisdictions – including the U.S.
Industry sources have also pointed to SEBA Bank in Switzerland, FV Bank in Puerto Rico and Jewel Bank in Bermuda, as well as Tether and FTX-tied Deltec in the Bahamas as options for U.S. dollar-based banking. A list sent out to some companies in the Digital Currency Group umbrella (which includes CoinDesk) also identified EQIBank in Dominica. These banks didn’t respond to CoinDesk’s request for comment as of press time.
Last week, three of crypto’s preferred banks in the U.S. became effectively defunct. Silvergate Bank (SI) was liquidated, whereas Silicon Valley Bank (SVB) and Signature Bank (SBNY) were shut down by regulators.
While an interim solution for Silicon Valley Bank has been set up in the form of a bridge bank to allow customers to use their accounts, in the long-term, companies will have to move their funds to other banks.
Read more: The Banking Crisis Is Not Crypto’s Fault
Europe and beyond
Europe’s relative regulatory clarity could prove an asset, particularly as the U.S. lacks a regulatory framework and the trust of many crypto insiders in U.S. authorities has been shaken. Reported claims that the closure of Signature Bank was part of a larger campaign against the crypto industry have raised concerns among industry participants.
“There is a very real risk that more crypto companies will move offshore, particularly with regulatory frameworks being proposed in the U.K. and the E.U.,” said Dave Weisberger, CEO and co-founder of algorithmic trading platform CoinRoutes.
Crypto firms will likely look beyond Europe for their banking needs as more jurisdictions are increasingly friendly toward digital assets. “Global crypto companies will definitely be looking at banking options in Europe, Hong Kong and the Middle East,” said Sanjay Raghavan, VP of Web3 initiatives at real estate investment platform Roofstock onChain. He particularly pointed to the United Arab Emirates, which is “embracing crypto innovation and has announced plans to launch an economic free zone dedicated to crypto and digital asset companies.”
Some crypto firms were already looking to go overseas or offshore even before the closing of these three banks, said Josh Frank, co-founder and CEO of information platform The Tie. “Many crypto companies already had multiple on and off-shore banking partners,” he said, noting that U.S. companies will likely prefer Caribbean and European banks first.
Regulatory pressure
Regardless of where U.S. crypto companies look for their banking partners, regulatory risk in their home jurisdiction will likely loom large.
The willingness of internationally established banks to do business with U.S. crypto entities at the moment also hangs on the question of what the U.S. regulators will let the companies do for their banking partnerships. “Many European and Asian banks also have some U.S. presence which could presumably put them in sight of regulators if they are banking U.S. customers via offshore entities,” Frank said.
Being approved by banks in European countries will likely take longer and be a heavier lift. Only crypto companies who are regulated and have proper compliance and governance will be able to access non-U.S. banks, said Henri Arslanian co-founder and managing partner of Dubai-based Nine Blocks Capital Management.
“Bank Frick is reviewing every new onboarding case individually. We apply and have always applied the same strict standards in the crypto area as in the classic banking business. If all necessary local KYC/AML standards are fulfilled, it is also possible to onboard jurisdictions outside Europe,” Bank Frick’s Head Blockchain Banking Nicolas Marxer told CoinDesk.
Sygnum Bank for example, does not onboard U.S. clients, said Martin Burgherr, Chief Clients Officer at Sygnum Bank, so the applicants for new bank accounts are likely knocking on the wrong door.
Read more: Banking Crisis Won’t Kill Crypto-Banking Despite Short-Term Pain
