Silvergate quits Coinbase, crypto hedge funds seek new banks

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Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital used to be Silvergate bank’s most notable crypto clients.

On March 2, Silvergate Bank, a leading lender to crypto companies, lost five partners owing to a spate of investigations and litigation.

Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital were among the most well-known cryptocurrency companies that used Silvergate as their banking partner.

Coinbase’s discontinuation of service has compelled a crypto hedge fund to seek an other banking partner.

Digital Asset Capital Management (DACM), a crypto hedge fund with over $400 million in assets, began its search for a new banking partner in Switzerland after the Silvergate scandal on March 3.

DACM used the real-time network of Silvergate to transfer money to and from Coinbase Global’s platform.

Richard Galvin, co-founder of DACM, said in an interview with Bloomberg that although some U.S. banks may handle crypto transactions, they are not as crypto-focused as Silvergate.

Finding a new partner might take some time, he warned, and they are now “negotiating with certain Swiss banks.”

Switzerland was one of the first nations to regulate crypto banks and provide banking licenses. In August of 2019, the Swiss Financial Market Supervisory Authority granted SEBA Bank AG a banking and securities dealer license.

Due to its instantaneous and real-time bank transfer services, Silvergate was popular among crypto firms. Consequently, the transfer of cash may take longer in the absence of such services.

Signature Bank seems to be the next preferred fintech bank for crypto firms in the United States. Coinbase has already switched the financial transfers of its top customers to Signature Bank.

Signature Bank might be the next best option for cryptocurrency businesses, but the issue is for how long.

Signature Bank stated in December 2022 its plan to remove up to $10 billion in deposits from customers holding digital assets, initiating a mass exodus from the cryptocurrency industry.

The bank has previously broken connections with Binance, ceasing to provide SWIFT financial services to the cryptocurrency exchange.

Due to the lack of clear market laws, it has always been difficult for crypto enterprises to secure a banking partner. But, the Silvergate scandal has increased the complexity of sending funds to crypto exchanges.