- Crypto firms in the US are now seeking banking services from Swiss banks seeing as the major crypto-friendly banks have been shut down.
- Swiss banks have recently been experiencing higher rates of inquiries from US companies, businesses, and foundations.
- The onboarding requirements into non-US banks are set to be high as banks will require full compliance with the existing US regulations.
Crypto companies based in the U.S. have begun to seek banking services offshore following the collapse of three of the significant crypto-friendly financial institutions.
The first to shut down was Silvergate Bank which announced its decision to liquidate voluntarily on the 3rd of this month after suffering massive losses in the aftermath of the FTX collapse in November last year.
On Friday, Silicon Valley Bank, the financial home to many startups and tech companies in Silicon Valley, was shut down by the California Department of Financial Protection and Innovation, resulting in chaos in the crypto market as USDC depegged along with several other stablecoins. Its closure also led to bank stock prices tanking globally as investors feared further contagion.
Silvergate’s main rival and next alternative to crypto firms, Signature Bank, was closed on Sunday by U.S. regulators who cited that allowing the bank to continue operating would threaten the stability of the entire financial system.
The Crypto Exodus to Switzerland
As much as there are still many options within the United States, including Customers Bank, First Foundation Bank, Sutton Bank, Evolve Bank & Trust, Bankprov, Quontic Bank, and Cross River Bank, the heightened regulatory crackdown in the U.S. is sending crypto firms in search of greener pastures.
As such, Swiss banks have reported increased interest and inquiries from U.S. crypto banks over the last few days. Swiss-based Arab Bank has reported growing U.S. businesses looking to establish relationships, including venture capital firms, foundations, trading firms, and even treasuries. The bank’s head of treasury and financial institutions, Rani Jabban, confirmed that approximately 80% of them were former customers at Silvergate saying, “We had 10-20 inquiries so far… but that doesn’t mean that we can cater and open accounts for all of them.”
However, he said that due to the regulatory difficulties involved with onboarding clients based in the U.S., only one or two of the firms would be taken up as customers at the Arab Bank.
Similarly, the managing director of SEBA Bank in Switzerland, Yves Longchamp, revealed that their bank website had experienced a
“pronounced uptick” in traffic from the U.S.
He also stated that representatives from their branches in Singapore, Hong Kong, Abu Dhabi, and Switzerland also reported increased interest from potential clients, adding that “Crypto firms and other money managers have already started the onboarding process, and many calls are scheduled next week.”
On the other hand, Sygnum Bank stated that it would not onboard any U.S. clients according to its policy and the need for regulatory clarity. This contradicts the bank’s website description, where Sygnum calls itself “the world’s first digital asset bank.”
The Looming U.S. Regulations
As long as these crypto businesses are still based in the U.S., U.S. regulations will always be a concern limiting their operations, regardless of which bank they partner with. Whether or not global banks accept the crypto firms as clients will be determined by what U.S. regulators permit the firms to do for their banking partnerships.
Resultantly, being taken in by an offshore bank will be very difficult and will take a long time since banks will most likely only onboard crypto firms that have fully complied with the set regulations and uphold proper governance structures and practices.