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The digital asset industry is facing a banking crisis due to the collapse of the crypto-friendly Silvergate Bank, and Crypto.com has not been left behind.
The Singapore-based exchange is now only able to provide euro banking services to users in the European Economic Area (EEA) after it lost the ability to accept dollar deposits due to problems with its banking partners.
For any cryptocurrency exchange, maintaining a sufficient number of fiat merchants is essential to ensure liquidity and affects the ability of digital assets to appreciate in value. Market analysts attributed the 10% Bitcoin price correction in January to Binance's suspension of dollar transfers.
An exchange that has the ability to serve users in only one part of the world and therefore in euros, a much less liquid currency for cryptocurrencies (most cryptocurrency trading pairs are denominated in US dollars), will raise doubts about its liquidity.
© Provided by CoinDesk (Crypto.com app screenshot)“Our fiat euro wallet service provider recently restricted access for EEA residents through the Single Euro Payments Area (SEPA) system,” a Crypto.com spokesperson told CoinDesk.
“Because the intended purpose of SEPA is to facilitate borderless local transfers between network members within the EEA, EUR deposits/withdrawals through this service provider are not available to non-EEA residents,” the spokesperson added.
Finding a reliable partner is not an easy task
All of this comes as Crypto.com has faced some upheavals due to its relationship with two banks and the wider implications of the cryptocurrency industry.
Crypto.com's former banking partner was Transactive Systems, which had licenses in the UK and Lithuania. The Central Bank of Lithuania, which also acts as a watchdog for the country's market, ordered the company to suspend virtual currency trading in January due to "serious violations" of anti-money laundering laws.
Bloomberg reported that Transactive is the brainchild of PacNet, a Vancouver-based payment processor indicted by the U.S. Department of Justice, which it has called a "transnational criminal organization", for processing payments for mail fraud schemes.
In the US, four company executives were charged with mail fraud and money laundering. Authorities in the province of British Columbia, the company's headquarters, are seeking to seize more than 17 million Canadian dollars ($12.31 million) in assets owned by executives through a forfeiture lawsuit.
Crypto.com lost the ability to accept US dollar fiat deposits when its US banking partner, Metropolitan Commercial Bank, pulled out of the crypto business in January after being reviewed by its board of directors.
The exchange continues to offer users the ability to buy cryptocurrencies with a credit card, and in September began waiving fees for new users during the first week.
A spokesperson for Crypto.com declined to name specific banking partners for the exchange, saying only that it works with "diversity." They said that the transition to a new payment provider was completed on January 25th.
Online data shows healthy deposits
Data from blockchain analytics platform Nansen shows that the Crypto.com coin balance is $3.6 billion, while the stablecoin balance is $776 million. It also reported a positive net flow of $248.8 million over the past week.
There are currently 297 active addresses for CRO, the Crypto.com token exchange, which is indicative of the number of experienced traders on the platform (exchange token holders enjoy reduced transaction fees).
That number jumped from 1,100 in mid-January during a mini bull market to 10,000 when the exchange bought sponsorship rights to the Los Angeles Lakers arena from the National Basketball Association.
CRO is down 16% in the last 30 days and 82% in a year.