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Crypto Firms Struggle to Find Banking Partners Amid Lender Shortages

Crypto companies urgently seek banking partners after three crypto-friendly lenders in the U.S. collapsed last month, raising the risk that their business will become concentrated in smaller financial institutions.


U.S. Regulators Concerned Over Bank Business Models Focusing on Crypto

The scenario has alarmed U.S. regulators, who are skeptical of the safety and soundness of bank business models that concentrate heavily on crypto clients following the implosion of Silvergate Capital, Signature Bank, and Silicon Valley Bank.

U.S. regulators have also advised banks to be vigilant for liquidity risks stemming from crypto-related deposits, which may be subject to rapid outflows if customers attempt to redeem their crypto assets for real money.

Mainstream Banks Increasingly Wary of Crypto Clients

Mainstream banks have become more cautious of crypto clients after high-profile collapses, including the bankruptcy of major exchange FTX and a lack of regulation.

Digital Asset Companies Turn to Smaller Financial Institutions

With few options left, digital asset companies are turning to smaller financial institutions, some in more remote corners of global finance.

Smaller Banks Experience Surge in Account Opening Requests

Smaller banks like FV Bank, Bank Frick, and Arab Bank have seen a significant increase in account opening requests from crypto firms following the collapse of larger, crypto-friendly banks.

Growing Concentration Risk Poses Challenges for Crypto Banking Options

According to Nikki Johnstone, a partner at Allen and Overy law firm in London, the concentration risk resulting from a growing number of clients seeking business from smaller firms is the "biggest challenge" of having limited crypto banking options.

Crypto Companies Rely on Banks for Dollar Deposits and Business Activities

Despite the crypto industry's goal to replace traditional banks, cryptocurrency companies still require access to banks to hold customers' dollar deposits and for day-to-day business activities.

Several top banks continue turning away most potential crypto-related customers, while others said they only work with top-tier firms.

Smaller Crypto Start-ups Face Difficulty Securing Banking Partners

Smaller crypto start-ups may find it more challenging to secure a banking partner due to a lack of banking partners available in the market, particularly for smaller and less-proven ventures, according to Ricardo Mico, the U.S. CEO of Banxa.