US crypto firms explore European banking partners amid financial crisis

by Arthur · March 13, 2023

The recent US banking crisis, which resulted in the loss of three crypto-friendly banks, Silvergate Capital, Silicon Valley Bank and Signature Bank, has raised concerns among US-based firms. Amidst the alarms of the faltering crisis, crypto firms appear to be exploring diversification across international jurisdictions.

In the short term, European banks seem like the right choice for these American firms. While the crisis is ongoing, the most viable option is Switzerland, known for its banking structure and financial system.

According to Reuters reportUS-based firms are scrambling to open Swiss bank accounts after the banking sector’s devastating collapse. However, bankers said the Swiss firms may not accept them. This has made it difficult for crypto firms to access lenders in the United States.

Is Switzerland the only option for American firms?

Following the closure of Silvergate Capital, given the November 2022 collapse of crypto exchange FTX, pro-crypto banks have taken a significant blow. The recent debacle affected stablecoin reserves and caused further contagion to the financial sector.

Caught in the middle of regulatory efforts, along with bank closures in the US, it may push companies to seek banking partners in Europe, as mentioned, Asia and the Middle East.

While US regulators pressure companies and banking institutions to break partnerships, the famous “Crypto Valley” located in Zug, Switzerland, known for its private banking system, has been one of the more welcoming countries in Europe for the crypto industry.

Yves Longchamp, CEO of crypto-focused SEBA Bank in Switzerland, told Reuters that the bank’s website had seen a “pronounced increase” in traffic from the US.

Additionally, in a global conference call on Friday, representatives from the bank’s offices in Singapore, Hong Kong, Abu Dhabi and Switzerland reported increased interest from potential clients involved in the US banking crisis, Yves Longchamp added:

Crypto firms and other money managers have already started the onboarding process and many conversations are planned in the next weeks.

According to the report, the Switzerland-based Arab Bank noticed an increase in interest from most American firms or firms involved in crypto venture capital. These companies have been on a mission to open accounts in the last few weeks before the collapse of Silvergate Capital.

Will other jurisdictions offer the same banking services for crypto firms?

As for the possibility of other jurisdictions accepting US firms’ capital, Rani claimed he “doesn’t see any bank offering the structure” that Signature Bank and Silvergate offered with their internal 24/7 blockchain settlement network.

In the Middle East, Dubai has been one of the “hot spots” for crypto firms looking for a way out of the crisis in their home country. Given their pro-regulatory efforts and governments’ willingness to welcome the emerging financial sector, Hong Kong and Europe have become more attractive to the industry.

After the collapse of Silicon Valley Bank on Friday, the banking crisis has spread offshore, also affecting European banks; investors dumped European banking stocks for the third day in a row.

On the other hand, US banks reportedly lost about $90 billion in market value on Monday amid growing investor concerns. Shares of First Republic Bank plunged, as did those of Western Alliance Bancorp and PacWest Bancorp.

Meanwhile, crypto’s total market capitalization has passed $1 trillion. Although stablecoin reserves have been affected by the financial crisis, the crypto market continues its upward trajectory aiming for new annual highs.