Cryptocurrency Companies have been left bankrupt after the collapse of two lenders in the industry.
According to a Monday (March 27) report by the Wall Street Journal, some banks have opened their doors to crypto firms, despite growing pressure from United States regulators.
This month, two banks previously known for their involvement with the crypto sector, Silvergate and Signature, were shut down. Silvergate was voluntarily liquidated on March 8, following a filing with regulators expressing concerns about its ability to remain in business. Four days later, Signature Bank was taken over by the Federal Deposit Insurance Corporation (FDIC) after a run on deposits.
As PYMNTS reported, it was a double blow for the crypto community.
Signature had a proprietary payment network called Signet, which enabled commercial crypto clients to make real-time payments (RTP) 24/7. With Silvergate’s closure, Signet was the only way for many companies to transfer money quickly to vendors and exchanges.
However, industry executives told the WSJ that other banks have stepped in to fill the void, with many receiving hundreds of applications in the past two weeks. Rich Rosenblum, co-founder and president of crypto trading platform GSR, said: “There are dozens of other banks, both onshore and offshore, that are taking advantage of this opportunity.”
Banks are still hesitant to get involved with crypto companies due to ongoing regulatory scrutiny. On Monday, the Commodity Futures Trading Commission (CFTC) charged the CEO of cryptocurrency trading platform Binance, Changpeng Zhao, with violating several regulations. CFTC Chairman Rostin Behnam said: “For years, Binance knew they were violating CFTC rules, working actively to keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law.”
In addition, the Federal Reserve issued an order preventing crypto-focused Custodia Bank from becoming a member of the Federal Reserve System, crushing “lingering industry hopes that Custodia might serve as a qualified and regulated on-ramp to the traditional financial sector,” according to PYMNTS.
The order stated that Custodia “has been unable to demonstrate that it could conduct an undiversified business focused on crypto-asset-related activities in a safe and sound manner and in compliance with Bank Secrecy Act (BSA) and Office of Foreign Assets Control (OFAC) requirements.”
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