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- In the wake of Silvergate and the collapse of Signature Bank, crypto founders are facing dwindling banking options.
- Some prefer to transfer their money abroad with the help of financial companies like Jewel and BCB Group.
- Others choose to limit unencrypted transactions but avoid US banks altogether.
A number of crypto- and startup-friendly banks – Silvergate, Signature and Silicon Valley Bank – face a huge vacuum following the failure of a number of cryptocurrency founders. Some are considering moving their money overseas, such as a list of banks and fintech services they can safely access in the United States.
Silvergate and Signature in particular have played a key role in funding crypto startups, several founders told Insider. But now startups are turning to other US banks like Cross River Bank and Consumer Bank. However, while these alternatives offer cryptocurrency services, they do not offer real-time weekly cryptocurrency transactions like the two failed banks did, the founders said.
"The more friction there is now, the slower it will be," said Jonas Ehrlich, co-founder of Den, which creates money management tools for decentralized autonomous organizations, or DAOs.
Long before the collapse of SVB and the demise of Signature, cryptocurrency founders found banking locations outside of the United States in places like Dubai and Singapore. Now, cryptocurrency founders and investors, particularly on crypto forums and Telegram chats, have expressed concern that US regulators are looking to ban cryptocurrency companies from the US banking system altogether. New York state regulators said the decision to close the firm was unrelated to its crypto business, but the bank is under criminal investigation in the US for its dealings with crypto clients before the collapse.
However, some founders, especially those based outside the US, are now looking to further reduce their dependence on the US banking system. European company BCB Group and Bermuda-based fintech firm Jewel are starting to revive as crypto-enabled providers, several founders told Insider.
Alex Svanevik, the founder and CEO of Nansen, a Singapore-based blockchain startup, said his company maintained an account with Signature but transferred most of its funds to DBS Bank in Singapore before the bank closed. Although he now wants to add a BNY Mellon account and is actively working to grow his affiliates by opening more bank accounts.
According to Svanevik, Signature has been a safe bank, but potential retaliation against US banks dealing with cryptocurrencies, he said, "we have to be very careful with the Treasury Department."
Other industry founders have tried to put most of their money into cryptocurrencies to limit their reliance on US banks. "If we could pay in bitcoin and stablecoins, we would," said James West, founder of cryptocurrency exchange Globe.
But this is a difficult task, as crypto startups often need to conduct certain transactions, such as payroll, in dollars or other government-backed currencies. Companies backed by US VCs must open bank accounts in the country to receive their funds. West, for example, keeps small amounts of Globe funds in accounts at both Signature and Silicon Valley Bank.
"Investors were skeptical about using another provider," he said of the decision to use SVB.
Several founders told Insider that fintech startup Mercury used banking services like payroll and payments for businesses that didn't accept cryptocurrencies. Itai Svidler, co-founder of Den with Ehrlich, said he has also seen many companies trying to regulate their cryptocurrencies and reduce their dependence on third-party financial institutions.
"It's reluctance when they have to sign," he said.
But even relying on cryptocurrencies to manage cash comes with risks, as seen after the collapse of SVB. The USDC stablecoin, which was expected to hold steady at $1, fell below that peg for a while after USDC issuer Circle said it was holding a large portion of its reserves in SVB. Bec Jones, founder of the cryptocurrency holding company, told Insider that her company suffered losses trying to transfer funds from USDC to other cryptocurrencies.
More worrying, according to Jones, is the perception among cryptocurrency founders that US regulators are cracking down on banks that want to do business with cryptocurrency startups. Jones, whose company is based in the United States, said he was confident Mercury would use financial services for its business, but would remain alert to any changes in the law.
“This is a frequent discussion for US-based crypto companies,” he said. "When should we sail?"