U.S. Crypto Firms Explore European Banking Partners Amid Financial Crisis

The recent banking crisis in the U.S., which resulted in losing three crypto-friendly banks, Silvergate Capital, Silicon Valley Bank, and Signature Bank, has raised concerns among U.S.-based firms.  Amidst the alarms of the wavering crisis, crypto firms seem to be exploring diversifying across international jurisdictions. 

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

As per a Reuters report, U.S.-based firms are trying to open Swiss bank accounts after the reeling collapse of the banking sector. However, bankers said the Swiss firms might not accept them. This has made it difficult for crypto firms to access lenders in the United States.

Is Switzerland The Only Option For U.S. Firms? 

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

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

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

Yves Longchamp, managing director of crypto-focused SEBA Bank in Switzerland, told Reuters that the bank’s website had seen a “pronounced uptick” in traffic from the United States.

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

Crypto firms and other money managers have already started the onboarding process and many calls are scheduled next weeks.

According to the report, the Switzerland-based Arab Bank noticed an increase in interest from most U.S. firms or firms involved in crypto venture capital. These companies have been on a mission to open accounts in recent 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 U.S. firms’ capital, Rani claimed that 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 nascent financial sector, Hong Kong and Europe have become more attractive to the industry. 

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

On the other hand, U.S. 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, the crypto total market capitalization has surpassed the $1 trillion mark. Although stablecoin reserves have been affected by the financial crisis, the crypto market continues its upward trajectory with sights set on new annual highs.

Featured image from Unsplash, chart from TradigView.com