The United States banking sector is wary of doing business with crypto firms following the recent closures of several of the nation’s most supportive financial institutions. Industry participants, bank executives, and investors have reported banks making crypto partnerships more difficult, either through lengthy application procedures or by abandoning the industry altogether. As Bloomberg reported, Silvergate Bank, Signature Bank, and Silicon Valley Bank all fell apart within a week in mid-March, leaving crypto firms scrambling for new partners. Large global banks such as JP Morgan Chase and Bank of New York Mellon have some exposure to the industry, but their onboarding processes can take up to six months. Under guidance from the Federal Reserve, FDIC, and OCC, banks have been warned about risks to consider when dealing with crypto firms, such as the unpredictability of deposit inflows and outflows. Some speculate that the recent clampdown on crypto’s banking partners, combined with growing regulatory enforcement actions against major industry firms, is part of a wider government conspiracy to drive crypto out of the US, under the name “Operation Chokepoint 2.0”.
Crypto’s Banking Problem
Crypto firms are urgently seeking new partners after Silvergate Bank, Signature Bank, and Silicon Valley Bank all closed down within a week in mid-March. Cross River Bank received over 100 new client requests within days of SVB and Signature’s closure, with some of those clients being crypto firms. However, Cross River turned down almost all of those requests, noting it is “only considering companies with existing relationships with Cross River that are blue-chip customers and integral to the fintech ecosystem.” Crypto-focused Swiss banks have also been receiving a similar uptick in new traffic recently, particularly from former Silvergate clients. Bitstamp, which once used Silvergate and Signature, now uses MVB Financial Corp. and Customers Bancorp while exploring additional regional partners.
Operation Chokepoint 2.0
Some suspect that the recent clampdown on crypto’s banking partners, combined with growing regulatory enforcement actions against major industry firms is part of a wider government conspiracy to drive crypto out of the US, under the name “Operation Chokepoint 2.0.” Castle Island Ventures’ general partner Nic Carter has popularized this theory. Meanwhile, Representative Tom Emmer has scrutinized the government’s forced closure of Signature Bank as a deliberate anti-crypto attack.
“No banks want to put up their hand and say, ‘We are the guy serving the crypto industry,’ because they saw what happened,” he told Bloomberg. “No bank wants to be considered the next Silvergate or Signature.”