No Crypto Banking Port Has Really Opened Up in This U.S. Storm

As Silvergate, Signature and Silicon Valley banks imploded, crypto customers grabbed assets and ran, but those hoping to land at major U.S. banks have been mostly disappointed.

AccessTimeIconMar 20, 2023 at 2:49 p.m. UTC
Updated Mar 20, 2023 at 3:30 p.m. UTC

The biggest U.S. banks haven't stepped forward to welcome homeless crypto businesses scrambling for banking services after fleeing the wreckage of Silvergate Bank, Signature Bank and Silicon Valley Bank.

CoinDesk asked the top 20 U.S. banks by assets if they were taking on crypto customers, especially those businesses that recently lost their banking homes in the recent carnage. Most of them remained silent on the question. Some – including JPMorgan Chase (JPM), Citigroup (C), Bank of New York Mellon (BK) and Morgan Stanley (MS) – declined to comment.

Others were open about saying they aren't comfortable taking on crypto clients.

KeyBank (KEY), a regional lender based in Ohio, is between Silicon Valley and Signature in scale, so around the size of the institutions that crypto clients have been accustomed to using. But a spokeswoman there said the bank is focusing on those that meet its “moderate risk profile.”

“Crypto-focused firms do not fall within this category at this time,” she said.

And Citizens Financial Group (CFG), which is among the larger regional banks, said it doesn’t have “direct credit exposure to crypto/digital asset businesses, and it’s not something we’re looking to get into at this time,” according to a spokesman.

The panic over the collapse of tech-oriented banks – marking two of history’s largest government bank takeovers with Signature and Silicon Valley, plus a more recent cash infusion to First Republic Bank (FRC) from its banking peers – flooded the industry with businesses looking for places to handle their banking.

The banks CoinDesk surveyed represent about $13 trillion in assets – or about 56% of the U.S. banking sector. Not even BNY Mellon – known to handle custody for crypto companies’ assets, such as much of the liquid cash in stablecoin issuer Circle Internet Financial’s reserves – chose to openly address the situation, even though it has expanded its Circle business amid the turmoil.

Careful banks

The largest U.S. bank, JPMorgan, hasn’t slammed the door on crypto companies, but it’s being especially careful with any new customers, according to a person familiar with the situation. It won’t take on any full-on crypto businesses, but it’s still willing to extend basic banking services to a handful of companies that touch the industry, the person said, such as firms investing in some crypto projects.

JPMorgan has a complicated history with big digital-assets firms. The Wall Street banking giant has been severing business ties with Gemini, as CoinDesk first reported earlier this month, but it still maintains its working relationship with crypto exchange Coinbase (COIN). And while CEO Jamie Dimon is famously critical of digital assets, his bank has also experimented with high-level use of blockchain technology and its own internal token.

Citigroup is taking a similar approach as its rival at the moment. The doors are still open at Citi for new customers that can clear its due-diligence standards, but it’s not going near hard-core, crypto companies, such as token issuers, a person familiar with its approach said.

Industry insiders have been swapping hints about other banks – such as some foreign institutions that do business in the U.S. – they think might still be open to crypto companies. A person at one major crypto company said that more than two dozen U.S. banks are still doing business with the industry, even if it’s not openly advertised.

When Circle lost some of its banking partnerships. For instance, it turned to a tiny institution in New Jersey, Cross River Bank, that was known to do business with tech investment firms.

“As long as a crypto company can demonstrate its ability to be a good bank customer, it should be able to be banked,” said Sheila Warren, CEO of the Crypto Council for Innovation.

Risky clients

There’s also a risk that the very act of flagging friendly banks could open them up to questions about their own strengths.

While banks struggle under a rush of customer applications, they are also dealing with their industry’s unsteadiness, with the KBW index’s measure of bank stocks sliding about 22% from the point at which Silvergate began faltering two weeks ago. So crypto companies have been showing up at the doors of financial institutions that are themselves shaken by what’s been going on.

The banks are also unsure exactly which customers they can offer a hand to without it getting slapped by their regulators.

Whether the volatility or business practices of the crypto sector contributed to the failures of the industry’s favorite banks, the surviving institutions are under directives to be wary of digital assets. Since the collapse of FTX, leaders of the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency have expressed relief that they had resisted letting cryptocurrencies into the banking system. In recent months, they have solidified that position by warning the lenders they oversee that those that focus on crypto clients aren’t likely to convince their government supervisors that they are running a safe-and-sound bank.

Most of the banks are taking these statements to heart, and some insiders – such as former House Financial Services Committee Chairman Barney Frank, who is a board member at Signature – have more pointedly accused regulators of gunning for crypto.

When asked if they could provide more clarity on what kind of crypto business exposure might be acceptable at the banks they oversee, spokespeople for the Federal Reserve and FDIC declined to go any further than the statements they have put out in recent months.

Officials from both agencies have been called to a March 29 hearing of Frank’s old House committee to explain what happened with Signature and Silicon Valley.

For customers of those banks, federal authorities blunted some of this month’s panic when the FDIC stepped in to take charge of them and open up its deposit insurance to cover all the normally uninsured customers – a cohort that the bulk of the crypto clients fit into. Over the weekend, New York Community Bancorp (NYCB) stepped in to take over Signature’s non-crypto deposits, leaving an open question about the $4 billion in deposits still in limbo from its digital-assets business.

And federal officials have continued to try to calm the financial sector. Wally Adeyemo, deputy secretary of the U.S. Treasury Department, told CNBC last week that “deposit flows have stabilized in regional and small banks,” and in some cases they have “modestly reversed.” He credited that to the government’s aggressive move to protect uninsured depositors.

But banks are also seeing how charged up their critics are, such as Sen. Elizabeth Warren (D-Mass.), who hammered former Signature CEO Joseph J. DePaolo in a letter that cited “gross mismanagement that resulted in the bank’s failure.” She argued that the bank “embraced crypto customers with insufficient safeguards.”

The senator ended her letter with the question, “Why did you fail to adhere to regulators’ warnings about the risks associated with the crypto industry?”


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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.