Cryptocurrency Startups Race for Banking Partners

Cryptocurrency start-ups race for banking partners Increasing the likelihood that their business

Cryptocurrency startups race for banking partners Increasing the likelihood that their business will be concentrated in lower financial institutions to exchange their crypto assets for cash. Following the failure of three crypto-friendly lenders in the United States last month, crypto businesses have been scurrying to find banking partners, raising the danger that their business may become focused on smaller financial institutions. It's a scenario that worries US authorities, who have raised concerns about the safety and soundness of bank firms that are heavily focused on Cryptocurrency customers following Silvergate Capital Corp., Signature Bank, and Silicon Valley Bank all failed. Regulators in the United States have also warned banks to be on the lookout for liquidity concerns associated with crypto-related deposits, which might see quick withdrawals if consumers attempt to retrieve their crypto assets for real money.

FV Bank, a U.S. licensed fintech-focused bank in Puerto Rico, said it has had an increase in inquiries from potential clients in recent weeks, even though it is not insured by the Federal Deposit Insurance Corp. According to a spokeswoman, because the bank does not lend, it is not exposed to the same hazards as traditional banks that use a fractional reserve structure. A spokeswoman for Bank Frick in Liechtenstein stated the country has seen a significant increase in account opening requests, with the majority of inquiries coming from companies in Europe, Singapore, and Australia.

TOP TIER: Several large banks told Reuters that they are now turning away the majority of potential crypto-related customers, while others claimed they are only cooperating with top-tier enterprises-practices that most insist remain unaltered from their previous views According to a person familiar with the matter, JPMorgan Chase is not onboarding any clients that are predominantly crypto companies anywhere in the globe, except a few organizations, notably Coinbase, which has stated that it deposits customer monies with the bank. According to a source close to the Bank of New York Mellon, while the bank investigates each crypto business that wants to become a customer, it is very, very rigid in its screening procedure and has only taken on companies on a case-by-case basis. Circle, the primary issuer of USD Coin, keeps a portion of its reserves in the custody of BNY Mellon. According to Allen and Overy's lawyer Johnstone, banks are frequently wary owing to the increased money-laundering risk in the digital currency industry and a lack of comprehensive crypto regulation. However, finding a banking partner for a smaller crypto start-up may be more challenging, according to Ricardo Mico, the U.S. CEO of Banxa, a payment and compliance network provider for crypto.