Crypto hedge fund executive Marco Lim spent Monday racing to open bank accounts in Hong Kong after the sudden collapse of three US lenders.
(Bloomberg) — Crypto hedge fund executive Marco Lim spent Monday racing to open bank accounts in Hong Kong after the sudden collapse of three US lenders.
The hedge fund, MaiCapital, is based in the city and had cash at one of the fallen institutions, Signature Bank. MaiCapital needs alternatives and managing partner Lim was pressing lenders to speed up account opening.
“The two biggest crypto friendly banks are gone,” Lim said, referring to Signature and Silvergate Capital Corp., which also had many crypto clients and said Wednesday it would liquidate. “I’ve been through too many crises.”
Silvergate, Signature and Silicon Valley Bank were toppled in the past few days amid bank runs, spurring the US to introduce a new backstop to shield deposits. The loss of Silvergate and Signature is particularly grievous for digital assets as the two operated real-time, seven-days-a-week payments networks for the crypto industry, aiding the flow of money to and from the sector.
Many crypto firms are now combing for banks outside the US, with lenders in Switzerland and the United Arab Emirates among those in the spotlight. This tilt away from America had already begun due to growing regulatory heat there after the implosion of Sam Bankman-Fried’s FTX digital-asset exchange.
“The US isn’t as accommodative as it was toward crypto,” said Richard Galvin, co-founder at fund manager Digital Asset Capital Management in Sydney. “It makes sense to diversify across jurisdictional grounds.”
Swiss Option
A Swiss bank is one of the lenders with which Digital Asset Capital Management is going through an “on-boarding process,” Galvin said.
In Switzerland, Sygnum Bank AG and SEBA Bank AG are among those that work with the digital-asset sector. Further afield, Deltec Bank & Trust Ltd. and Capital Union Bank in the Bahamas are also known for a crypto focus.
SEBA Bank is seeing increasing website traffic globally but more so in the US, the company said in a statement, adding that crypto firms have applied for accounts and that calls are scheduled with many other interested parties.
For US-based firms like the Coinbase Global Inc. exchange, American banks remain key. Coinbase on its website flags JPMorgan Chase & Co., Cross River Bank and Pathward as among institutions where it may deposit customer funds.
Circle Internet Financial Ltd., issuer of the second-largest stablecoin USDC, has just announced upcoming automated minting and redemption of the token via Cross River Bank. Circle has licenses and registrations in the US and had $3.3 billion of the reserves underpinning USDC at Silicon Valley Bank.
Skeptical Banks
One of the challenges for crypto companies is that banks are increasingly doubtful about the industry following a $2 trillion rout, a string of digital-asset blowups and intensifying regulatory scrutiny.
“There are banking services available, but the bar to entry has never been this high,” said Jonny Caldwell, co-head of asset management at Trovio, which focuses on traditional and digital assets. “Banks are checking for details to demonstrate the strength of businesses.”
Caldwell said he’s aware of several crypto funds looking at Middle Eastern and Swiss banks for alternative banking partners.
In the Middle East, Dubai has sought to attract investment with pro-crypto policies. Jurisdictions like Hong Kong and Europe have also become more enticing thanks to their regulatory efforts and friendlier governments. In the UK, BCB Group is looking to attract customers to its payment network for digital-asset outfits.
“I foresee more crypto institutions will start exploring the Asian banking system,” said Adrian Lai, founder of Newman Capital in Hong Kong, which runs a $50 million fund investing in web3. The term “web 3” refers to a vision of a decentralized internet built around blockchains, crypto’s underlying technology.
However, even if lenders such as Chinese banks in Hong Kong start taking crypto accounts, that won’t be like Silvergate or Signature, where the digital-asset industry was a key part of their operations, said Lucy Gazmararian, founder and managing partner of venture fund Token Bay Capital.
“Crypto was their main business,” she said. “We don’t have that in Asia that I’m aware.”
–With assistance from Zheping Huang and Yueqi Yang.
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