US banking crisis likely to push crypto firms offshore
US crypto firms are looking for offshore bank accounts following the collapse of three of the most digital asset-friendly financial institutions last week.
Sygnum in Switzerland and Bank Frick in Lichtenstein told CoinDesk that they have seen an increase in requests to open accounts in recent days, from various jurisdictions – including the US
While a temporary solution has been set up for Silicon Valley Bank in the form of a bridge bank to allow customers to use their accounts, in the long run companies will have to move their funds to other banks.
Europe’s relative regulatory clarity could prove to be an advantage, especially as the US lacks a regulatory framework and the trust of many crypto insiders in US authorities has been shaken. Reported claims that the closure of Signature Bank was part of a larger campaign against the crypto industry has raised concerns among industry players.
“There is a very real risk that more crypto companies will move offshore, especially with regulatory frameworks being proposed in the UK and EU,” said Dave Weisberger, CEO and co-founder of algorithmic trading platform CoinRoutes.
Crypto firms are likely to look beyond Europe for their banking needs as more jurisdictions become increasingly friendly to digital assets. “Global crypto companies will definitely look at banking options in Europe, Hong Kong and the Middle East,” said Sanjay Raghavan, VP of Web3 initiatives at real estate investment platform Roofstock onChain. He specifically pointed to the United Arab Emirates, which “embraces crypto innovation and has announced plans to launch an economic free zone dedicated to crypto and digital asset companies.”
Some crypto firms were already looking to go overseas or offshore even before the closure of these three banks, said Josh Frank, co-founder and CEO of information platform The Tie. “Many crypto companies already had multiple on and offshore banking partners,” he said, noting that US companies are likely to prefer Caribbean and European banks first.
Regardless of where US crypto companies look for their banking partners, regulatory risk in their home jurisdiction is likely to be high.
The willingness of internationally established banks to do business with US crypto entities at the moment also hinges on the question of what the US regulators will allow the companies to do for their banking partnerships. “Many European and Asian banks also have some U.S. presence that could presumably put them in the sights of regulators if they bank U.S. customers via offshore entities,” Frank said.
Getting approved by banks in European countries is likely to take longer and be a heavier lift. Only crypto companies that are regulated and have proper compliance and governance will be able to access non-US banks, said Henri Arslanian co-founder and managing partner of Dubai-based Nine Blocks Capital Management.
“Bank Frick reviews each new onboarding case individually. We use and have always used the same strict standards in the crypto area as in the classic banking business. If all necessary local KYC/AML standards are met, it is also possible to onboard jurisdictions outside of Europe ,” Bank Fricks Head Blockchain Banking Nicolas Marxer told CoinDesk.
Sygnum Bank, for example, does not have US customers on board, said Martin Burgherr, Chief Clients Officer at Sygnum Bank, so applicants for new bank accounts are probably knocking on the wrong door.