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.
(Bloomberg) — 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 initiate payments through Silvergate.
“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. “It might take some time to find a banking partner. 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 for ready access to traditional banks, many of which remain wary of the volatility in digital assets and potential regulatory heat. Silvergate sought to fill the void but became a victim of the contagion caused by the FTX exchange’s collapse in November.
Silvergate suffered a run on deposits last year in the wake of the bankruptcy of FTX, which was a key client. This week the bank said it’s reviewing whether it can remain viable.
“We were already taking steps proactively to reduce our deposits in Silvergate and find new bankers,” Galvin said.
In Switzerland, Sygnum Bank AG and SEBA Bank AG are among those that work with the digital-asset sector. Further afield, Deltec Bank & Trust Ltd. and Capital Union Bank in the Bahamas are also known for a crypto focus.
In the US, some smaller banks hitched their wagon to digital currencies as a way to rapidly grow deposits and tap into a source of zero-cost funding. But the FTX implosion spurred a rethink.
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 number of banking partners,” said Sydney-based Galvin.
Bitcoin slid as much as 6% on Friday as the Silvergate fallout reverberated around markets. The token’s rebound in 2023 from last year’s deep cryptoasset rout has moderated to 35%.
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