Crypto Firms Seek Alternative Banking Amid Regulatory Scrutiny

Cryptocurrency firms are turning to a new banking system amid increasing regulatory scrutiny. In the U.S., smaller lenders now provide an alternative for crypto startups after the collapse of Silvergate Capital Corp. and Signature Bank. Customers Bancorp Inc., Pennsylvania, is one of the favorite destinations for many crypto firms.

The search for alternative banking systems is not restricted to the United States. Swiss and Asian banks are also stepping in and offering solutions, albeit using a selective approach. The situation is slightly different in the UK, where crypto firms are patronizing payment-service providers amid worsening access to banking.

The current situation leaves crypto firms with limited banking options. The developing convergence between the worlds of cryptocurrency and mainstream finance is vanishing and gradually detaching from the U.S.. That comes with the increasing wariness of U.S. banks in offering services to crypto firms.

The reaction from U.S. banks, and their increasing reluctance to serve crypto firms, followed a series of regulatory concerns generated in 2022. The issues spilled into 2023, resulting in the closure of the two crypto-supporting banks in the US, Silvergate and Signature.

Reportedly, this new trend leaves crypto firms with limited options. Most are smaller lenders that are not well-known in the industry. Therefore, before dealing with them, the crypto firms would carry out due diligence.

The current trend is bound to continue, considering the increasing regulatory scrutiny the industry is experiencing. Last week, the Securities and Exchange Commission (SEC) sued two high-profile exchanges, Coinbase and Binance. According to the SEC, both violated the Commission’s regulatory requirements. Both firms have since denied the allegations. However, the case is in court and may linger for a while.

Finding banking partners has been a perennial problem in the crypto industry. What crypto firms are currently going through is not new. The only concern is that when it seemed the industry was getting over that obstacle, it resurfaced differently. However, crypto firms are finding ways to navigate the hurdles and continue operating.

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