A crypto fund manager overseeing $400 million is looking to Swiss banks to help plug the gap created by the unraveling of a key payments network operated by ailing US lender Silvergate Capital Corp
Digital Asset Capital Management used Silvergate’s round-the-clock, real-time network to move funds to and from Coinbase Global Inc.’s platform. But coinbase, CRYPTO.COM and gemini are among the exchanges that will no longer accept or launch silver GATE payments.
“There are some banks that handle crypto transactions but they are not crypto focused, unlike Silvergate,” Richard Galvin, co-founder at Digital Asset Capital Management, said in an interview Friday. "Looking for a banking partner may take some time. We’re speaking to some Swiss banks.”
Galvin, who didn’t name the banks, said the concerns over Silvergate have “raised the difficulty level” of transferring cash to crypto exchanges and that it might take longer to move funds as the Silvergate network allowed rapid transfers between accounts, exchanges and over-the-counter trading desks.
The crypto industry has long struggled to easily access traditional banks, many of which are wary of the volatility of digital assets and the potential heat of regulation. Silvergate tried to fill the void but became a victim of the contagion brought about by the FTX stock market crash in November.
Silvergate went through a deposit race last year in the wake of ftx's bankruptcy, which was a key customer. This week, the bank stated that it was examining whether it could continue to be viable.
"We were already proactive in reducing our deposits at Silvergate and finding new bankers," Galvin said.
In Switzerland, Sygnum Bank AGSEBA Bank AG are among those that work with the digital-asset sector. Further afield, Deltec Bank & Trust Ltd.Capital Union Bank in the Bahamas are also known for a crypto focus.
In the United States, some small banks hooked their wagons to digital currencies as a means of rapidly growing deposits and taking advantage of a source of financing at no cost. But the implosion of FTX has led to rethinking.
New York-based Signature Bank, for instance, said in December that it intends to shed as much as $10 billion in deposits from digital-asset clients, embarking on a widespread pullback from the cryptocurrency industry.
"We believe in diversifying our risks and have several banking partners," said Galvin from Sydney.
Bitcoin slipped as much as 6% on Friday as the fallout from Silvergate shone around the markets. The rebound of the token in 2023 compared to last year deep cryptoasset rout moderated at 35%.