Marco Lim, the head of a cryptocurrency hedge company, on Monday rushed to register bank accounts in Hong Kong following the abrupt failure of three American lenders.
The city-based hedge firm MaiCapital has funds at one of the destroyed banks, Signature Bank. MaiCapital is in need of alternatives, and the managing partner Lim pushed lenders to expedite the establishment of accounts.
Lim said, referring to Signature and Silvergate Capital Corp, “The two biggest crypto-friendly banks are gone,” which also had many crypto clients and mentioned on Wednesday that it would liquidate. “I’ve been through too many crises.”
In reaction to the latest bank runs that brought down Silvergate, Signature, and Silicon Valley Bank, the US introduced a new backstop to cushion deposits.
Silvergate and Signature manage real-time, round-the-clock payment networks for the cryptocurrency business, facilitating the flow of funds into and out of the sector. Their loss is especially painful for digital assets.
The United Arab Emirates and Switzerland are the 2 lenders that many cryptocurrency companies are currently searching for in nations other than the US.
Due to increasing regulatory pressure, thereby following the collapse of Sam Bankman-FTX Fried’s digital asset exchange, this tilt away from America has already started.
Richard Galvin, co-founder of fund manager Digital Asset Capital Management in Sydney said, “The US isn’t as accommodative as it was toward crypto,”
“It makes sense to diversify across jurisdictional grounds.”
According to Galvin, one of the lenders with whom Digital Asset Capital Management is undergoing an “on-boarding procedure” is a Swiss bank.
Sygnum Bank AG and SEBA Bank AG are two banks that cooperate with the digital asset market in Switzerland. Deltec Bank & Trust Ltd. and Capital Union Bank in the Bahamas are the other institutions with a focus on cryptocurrencies.
According to a statement from the company, SEBA Bank is experiencing an increase in website traffic worldwide, particularly in the US. The company also stated that crypto firms have filed for accounts and that talks have been set with numerous additional interested parties.
U.S. banks continue to be crucial for U.S.-based businesses like Coinbase Global Inc. Co., JPMorgan Chase & Co., Cross River Bank, and Pathward. They are listed as financial institutions where Coinbase may deposit customer funds on their website.
The second-largest stablecoin USDC’s issuer, Circle Internet Finance Ltd., recently revealed plans for automated token mining and redemption through Cross River Bank.
The US has granted Circle licenses and registrations, and Silicon Valley Bank held $3.3 billion of the reserves that supported USDC.
The Banks’ growing skepticism of the cryptocurrency sector, which has been plagued by a $2 trillion meltdown, a succession of digital asset failures, and increased regulatory scrutiny, is an obstacle that’s been faced by the sector’s businesses.
“There are banking services available, but the bar to entry has never been this high,” said Jonathan 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.”
According to Caldwell, numerous cryptocurrency funds are searching for alternative banking partners among Middle Eastern and Swiss banks.
Dubai has made an effort to entice investment in the Middle East by implementing pro-crypto regulations. Due to their regulatory initiatives and friendlier governments, jurisdictions such as Hong Kong and Europe have also grown more alluring.
UK-based BCB Group is attempting to draw clients to its payment network for businesses dealing in digital assets.
“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, and crypto’s underlying technology.
According to Lucy Gazmararian – the founder and managing partner of venture capital firm Token Bay Capital – even if lenders like Chinese banks in Hong Kong start accepting cryptocurrency accounts, it won’t be like Silvergate or Signature, where the digital-asset industry is a crucial component in their operations.
“Crypto was their main business,” she said. “We don’t have that in Asia that I’m aware of.”
- Published By Team Hongkong Journalist