Bank failures spell turmoil for crypto firms

Crypto hedge fund executive Marco Lim spent Monday — after the spectacular collapse of financial companies Silvergate Capital, Signature Bank and Silicon Valley Bank — racing to open bank accounts in Hong Kong. His hedge fund, MaiCapital, had cash at one of the fallen institutions, Signature Bank.

“The two biggest crypto-friendly banks are gone,” Lim said, referring to Signature and Silvergate, which also had many crypto clients.

Many crypto firms are now combing for banks outside the United States. This tilt away from America had already begun due to growing regulatory heat after the implosion of Sam Bankman-Fried’s FTX digital-asset exchange.

The loss of Silvergate and Signature is particularly grievous for digital assets as the two operated real-time, seven-days-a-week payments networks for the crypto industry, aiding the flow of money to and from the sector.

For U.S.-based firms like the Coinbase Global exchange, however, American banks remain key. Coinbase on its website flags JPMorgan Chase among other U.S. institutions where it deposits customer funds.

One of the challenges for crypto companies is that banks are increasingly doubtful about the industry following a $2 trillion rout, a string of digital-asset blowups and intensifying regulatory scrutiny.

“There are banking services available, but the bar to entry has never been this high,” said Jonny Caldwell, co-head of asset management at Trovio, which focuses on traditional and digital assets. “Banks are checking for details to demonstrate the strength of businesses.