A manager of a cryptocurrency fund that oversees $400 million is appealing to Swiss banks for assistance in filling the void left by the unraveling of a crucial payments network that was controlled by an insolvent US lender called Silvergate Capital Corp.
To transfer funds to and from Coinbase Global Inc.’s platform, Digital Asset Capital Management utilized Silvergate’s real-time network, which is available around the clock. However, exchanges such as Coinbase, Crypto.com, and Gemini are among those that will no longer take payments initiated through Silvergate or accept payments initiated through them.
Richard Galvin, co-founder at Digital Asset Capital Management, said in an interview Friday-
“There are some banks that handle crypto transactions but they are not crypto focused, unlike Silvergate”
“It might take some time to find a banking partner. We’re speaking to some Swiss banks.”
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Galvin, who did not name the banks, stated that the concerns over Silvergate have “raised the difficulty level” of transferring cash to cryptocurrency exchanges and that it may take longer to move funds because the Silvergate network allowed for rapid transfers between accounts, exchanges, and over-the-counter trading desks. Galvin did not name the banks.
The cryptocurrency business has had a long-standing problem gaining easy access to traditional banking services. Many traditional banks are still apprehensive of the volatility of digital assets and the potential regulatory pressure that could be applied. Silvergate attempted to fill the hole but was ultimately unable to do so and fell prey to the epidemic induced by the failure of the FTX exchange in November.
In the wake of the failure of FTX, one of Silvergate’s most important customers, the company experienced a rush on deposits in the previous year. Last week, the bank announced that it is evaluating whether or not it can continue to operate profitably.
Galvin Said-
“We were already taking steps proactively to reduce our deposits in Silvergate and find new bankers”
There are a number of financial institutions in Switzerland that are involved in the digital asset market. Two of these institutions are Sygnum Bank AG and SEBA Bank AG. Farther away, in the Bahamas, both Deltec Bank & Trust Ltd. and Capital Union Bank are well-known for having a crypto-centric focus.
Some of the smaller banks in the United States have begun to embrace digital currencies as a means of swiftly increasing their deposits and gaining access to a source of funding with no associated costs. Yet, the implosion of FTX prompted a reevaluation of the situation.
For example, in December, the New York-based Signature Bank announced that it planned to remove as much as $10 billion in deposits from digital-asset clients, marking the beginning of a global pullout from the cryptocurrency business.
“We believe in diversifying our risks and have number of banking partners,” said Sydney-based Galvin.
On Friday, as the consequences from the Silvergate scandal resonated around markets, the price of bitcoin dropped by as much as 6%. The token’s recovery in 2023 from the severe decline in the value of cryptoassets experienced in the previous year has slowed to 35%.
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