Banks

Singapore to introduce uniform screening standards for crypto bank accounts

Potential guidelines reportedly won’t have a binding force over banks, which can rely on their own risk assessment.

Singapore regulators are working with traditional banks to develop uniform standards for screening potential customers from the crypto industry. The collaboration has been ongoing for the last six months. 

According to a Bloomberg report from April 6, the Monetary Authority of Singapore (MAS) has been working alongside the police forces to help local banks optimize their procedures for opening accounts of digital asset service providers. After half a year of cooperation, its results and conclusions for risk management and due diligence will be published in the next two months.

The potential guidelines will also cover the topics of stablecoins, nonfungible tokens (NFTs) and transferable gaming or streaming credits. At the same time, the banks will reserve the right to make decisions based on guidelines and their own risk assessment.

Related: Singaporean women ‘outperforming’ men in crypto trades, survey reveals

As MAS representatives told journalists, currently, there are no rules prohibiting the banks from working with digital asset providers:

“Banks make their own determination of whether to start or continue a banking relationship with a customer, balancing between commercial considerations and business risk tolerance.” 

Singapore has established itself as a hub for crypto businesses owing to its flexible tax policies, access to diverse tech talent and convenient location, allowing companies to operate smoothly within the region in Asian time zones. However, in late 2022, the MAS proposed banning digital payment token service providers from offering “any credit facility” to consumers, including both fiat and cryptocurrencies. Back then, local crypto lobbyists voiced their opposition to the proposal. 

Currently, the local enforcers are conducting a probe connected to failed Terraform Labs and its co-founder Do Kwon. The collapse of the Terra ecosystem caused a major implosion in the digital asset market, with losses of nearly $40 billion.

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‘Ludicrous’ to think Signature Bank’s collapse was connected to crypto, says NYDFS head

The superintendent of the New York Department of Financial Services reportedly dismissed claims the U.S. government was working to implement “Operation Choke Point 2.0.”

Adrienne Harris, superintendent of the New York Department of Financial Services, has reportedly said the closure of the crypto-friendly Signature Bank in March had nothing to do with exposure to digital assets.

According to an April 5 report in The Wall Street Journal, Harris made the remarks at the Chainalysis Links conference in New York City. She reportedly described the events leading up to the failure of Signature as a “new-fashioned bank run,” calling the idea that it had any relation to crypto exposure “ludicrous.”

Harris also reportedly pushed back against the idea that the United States government was actively working to limit certain industries’ access to U.S. banking services in what many have dubbed “Operation Choke Point 2.0.” The original Operation Choke Point, implemented by the U.S. Department of Justice from 2013 to 2017, targeted banks suspected to have exposure to companies potentially involved in fraud or money laundering.

The NYDFS took control of Signature Bank on March 12, claiming it was protecting the U.S. economy from “system risk.” The bank was the latest failure following the collapse of the crypto-friendly Silvergate Bank and Silicon Valley Bank.

Related: Tether ‘unequivocally reiterates’ no exposure to Signature Bank

Former House of Representatives member and Signature board member Barney Frank said there had been no issue with the bank’s solvency at the time of the seizure, suggesting regulators were making a “very strong anti-crypto message.” Some lawmakers including Colorado Senator Michael Bennet said Signature did not make “prudentially sound” decisions by associating with crypto firms.

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Swiss state-owned bank PostFinance to offer Bitcoin trading

PostFinance’s parent firm Swiss Post is known for its pro-crypto stance, working on its own crypto custody services and issuing crypto stamp collectibles.

PostFinance, a retail bank fully owned by the Swiss government, is preparing to offer its customers cryptocurrency trading and storage services.

PostFinance has partnered with the local cryptocurrency bank Sygnum to offer its customers a range of regulated digital asset banking services, the firms announced on April 5.

The partnership will specifically allow PostFinance customers to buy, store and sell major cryptocurrencies, including Bitcoin (BTC) and Ether (ETH).

The crypto services are enabled through Sygnum’s institutional business-to-business offering that provides banks with market entry to regulated and compliant digital products. The B2B network includes more than 15 partner banks and supports a “range of cryptocurrencies,” featuring revenue-generating services like staking.

PostFinance’s move into crypto comes in response to a growing demand from its customers, the bank’s chief investment officer Philipp Merkt noted, stating:

“Digital assets have become an integral part of the financial world, and our customers want access to this market at PostFinance, their trusted principal bank.”

Founded in 1906, PostFinance is the financial services unit of Swiss Post, Switzerland’s national postal service. The public company is known for its pro-crypto stance, building its own crypto custody platform and issuing digital collectibles linked to physical stamps in 2021.

Related: Brazil bank BTG Pactual to issue USD-pegged stablecoin

The announcement on PostFinance’s crypto trading services comes shortly after Swiss Post announced the launch of Crypto Stamp 3.0, a new crypto stamp iteration featuring physical and nonfungible token versions integrated with artificial intelligence technology. Swiss Post’s new crypto stamp is scheduled to go on sale on May 2, 2023.

PostFinance did not immediately respond to Cointelegraph’s request for comment.

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Stablecoin issuer Tether accessed US banking system using Signature: Report

At the time New York regulators took control of Signature in March, there was reportedly a system in place for Tether clients to send dollars through the bank’s Signet platform.

Tether, the firm behind the largest stablecoin by market capitalization, reportedly allowed its clients to send funds through Signature Bank’s payments platform — granting the firm access to United States banks.

According to an April 4 Bloomberg report, Tether had a pathway to the U.S. banking system by instructing its users to send dollars though Signature’s Signet to its Bahamian partner Capital Union Bank. The report cited “people with knowledge of the situation,” who added this system was in place at the time regulators took control of Signature in March.

While the arrangement between Tether and Signature reportedly would not have been illegal, failing to disclose such information to the investing public would suggest high-risk practices. According to a Tether spokesperson, banks used by the stablecoin issuer “always had access to several banking channels and counterparties,” and associate entities “wouldn’t be affected by either direct or indirect exposure to Signature.”

The New York Department of Financial Services announced the shutdown of Signature on March 12, saying at the time the decision had been made with the Federal Deposit Insurance Corporation in an effort to “protect the U.S. economy.” Stablecoin issuer Paxos reported at the time it had $250 million tied to Signature, while Tether’s chief technology officer Paolo Ardoino said the firm didn’t have any exposure to the failed bank.

Related: Signature’s crypto clients told to close their accounts by April 5: Report

U.S. lawmakers continue to look into the collapse of the crypto-friendly bank, the third in a chain starting with Silvergate and Silicon Valley. At a March 28 hearing of the Senate Banking Committee, FDIC chair Martin Gruenberg said Signature had not adequately managed traditional banking risks. Though Signature had reduced its exposure to digital assets in the wake of the collapse of the FTX exchange, one user has filed a lawsuit alleging the bank “aided and abetted” fraud facilitated by former FTX CEO Sam Bankman-Fried. 

The bank plans to sell its roughly $38 billion worth of deposits and $13 billion in loans to Flagstar Bank, a subsidiary of New York Community Bancorp. Gruenberg said $4 billion in crypto deposits would likely be returned to users sometime this week.

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UK banks are turning away crypto clients: Report

Challenges for crypto companies range from having applications rejected, accounts frozen, to being overwhelmed with paperwork.

Crypto companies are facing difficulties accessing banking services in the United Kingdom, according to multiple sources interviewed by Bloomberg. The few banks still working with crypto firms are requesting more documentation and information about how they monitor clients’ transactions.

Challenges include having applications rejected, accounts frozen and overwhelming paperwork. Crypto companies have even complained to the government of Prime Minister Rishi Sunak, as the situation worsened in the past weeks. The move goes in the opposite direction of Sunak’s plans to prioritize financial technology disruption and make the U.K. a global crypto hub.

“The U.K. banking reaction has been more acute than the EU one,” Tom Duff-Gordon, vice president of international policy at Coinbase, told Bloomberg. According to Duff-Gordon, the European Union’s efforts to establish a framework for digital assets are making banks more receptive to crypto firms in other countries. The European parliamentary committee passed the Markets in Crypto Assets (MiCA) legislation in October, nearly two years after it was first introduced in September 2020. Its final vote is scheduled for this month.

So far in 2023, venture capital investment in digital asset companies reportedly dropped 94% to $55 million in the U.K., according to data from PitchBook, against a 31% increase in other countries in Europe. Crypto companies are turning to payment service providers such as BCB Payments and Stripe to maintain business operations in the U.K.

Related: US crackdown will push crypto ‘center of gravity’ to Hong Kong: Kaiko CEO

Earlier in March, the HSBC Holdings and Nationwide Building Society banned cryptocurrency purchases via credit cards for retail customers, joining a growing list of banks in the country to tighten restrictions on digital assets. 

Also in March, the self-regulatory trade association CryptoUK proposed the creation of a “white list” of registered firms in the country to address banks limiting or banning transactions with crypto companies. “Many of the major U.K. banks have now put in place bans or restrictions, and we are concerned that other banks and Payment Services Providers (PSP’s) may also soon follow suit,” said CryptoUK. “We believe that government action is now warranted.”

Similar to the United States, authorities in the U.K. are tightening regulations on crypto companies. The Financial Conduct Authority proposed in February a set of rules that could subject executives of crypto firms to two years in prison if they don’t meet certain conditions related to promotion.

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Stablecoins are solution to crypto’s banking problem, exec says

Stablecoins are seen as a potential solution to crypto’s banking problem, but some of them are currently not immune to banking issues.

The collapses of banks like Silvergate have certainly impacted cryptocurrency exchanges but there are ways for the industry to survive without the support of banks, one executive believes.

Crypto exchanges significantly rely on traditional banking systems for customer deposits, which makes them vulnerable to various banking issues, according to Bitstamp USA CEO and global commercial officer Bobby Zagotta.

The executive believes that stablecoins — cryptocurrencies whose value is tied to fiat currencies or other assets — could be a solution to crypto’s banking problem.

“We are currently discussing how stablecoins can offer us an alternative to traditional banking,” Zagotta said in an interview with Cointelegraph on March 27. He added that stablecoins could potentially unlock new capabilities for the industry, allowing it to look at banking from a new perspective and to go back to the genesis and purpose of crypto, adding:

“One of the founding principles of our industry is to enable individuals to transact without dependence on third-party institutions, so there are other possibilities to be explored, such as the use of stablecoins to reduce frictions born of the banking system.”

According to Zagotta, stablecoins provide many benefits like faster and more cost-effective transactions, reduced reliance on banks and increased liquidity. “Depending on regulations it’s possible we will see a continued evolution and integration of stablecoins within exchanges amid the banking crisis,” the exec stated.

In the interview, Zagotta emphasized that the crypto industry needs to figure out the factors that led regulators to step in at Signature bank. That is necessary for the industry to ensure that crypto-friendly banks are operating in a safe and sustainable manner moving forward. He also cautioned exchanges against creating more risk for customers by hastily moving customer funds around different U.S. banks that may be stressed or at risk.

Related: Coinbase wants devs to build inflation-pegged ‘flatcoins’ on its new ‘Base’ network

According to the exec, Bitstamp currently has 15 banking partnerships globally, including U.S. banks like Customers Bank and MVB Bank, as well as European banks like LHV Bank and Gorenjska Banka that can process payments in USD as well. “We are also in conversations to onboard United Texas Bank, Western Alliance Bank, Axos Bank, and Cross River Bank to ensure we maintain a robust network in the midst of all of this change,” Zagotta added.

While Bitstamp is looking at stablecoins as a potential solution to crypto’s banking problem, it’s worth noting that some major stablecoins like USD Coin (USDC) aren’t immune to banking problems themselves. USDC issuer Circle faced major issues in March due to its $3.3 billion exposure to the collapsed Silicon Valley Bank (SVB). The events caused USDC to briefly lose its 1:1 peg with the U.S. dollar.

According to media reports, the banking crisis has been subsiding over the past few weeks but isn’t close to being over. According to José Manuel Campa, the head of the European Banking Authority, European banks have remained vulnerable following the demise of SVB and the subsequent emergency rescue of Credit Suisse by UBS.

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Africa: The next hub for Bitcoin, crypto adoption and venture capital?

Cointelegraph’s Elisha Owusu Akyaw shares how cryptocurrency is changing the financial landscape in Africa — and the opportunities and challenges that come with it.

The cryptocurrency space has no shortage of skeptics. While many people criticize the environmental impact of proof-of-work blockchains or the proliferation of scams, one particular argument against crypto often stands out: Blockchain has no real use cases. 

Every two weeks, Cointelegraph’s The Agenda podcast breaks down this critique and explores the various ways blockchain and crypto can help everyday people.

On this week’s episode of The Agenda, hosts Jonathan DeYoung and Ray Salmond chat with Elisha Owusu Akyaw, Cointelegraph’s own social media specialist and host of the Hashing It Out podcast, to break down how Africans are using crypto to strengthen financial inclusivity and potentially turn countries into hubs of technological innovation.

How crypto is helping everyday Africans

According to Akyaw, crypto offers a more convenient, affordable way to send money both regionally and around the world. “Western Union, MoneyGram and all of these money transaction firms or rails have made millions from Africa for so long” by charging high fees, said Akyaw, whereas the cost required to send money via crypto is significantly lower.

Bitcoin (BTC) also offers a better store of value for most Africans than local fiat currencies, Akyaw argued. Speaking on his own experience of living in Ghana, he said that “you can buy Bitcoin and keep it for the next one year or six months. It’s a better hedge against inflation than keeping the Ghanaian cedi.”

Finally, the crypto industry is opening up new opportunities on the continent. “At every point of development, Africa has been left behind,” said Akyaw. But the global nature of the industry and the fact that it’s still in its early development present a unique opportunity to participate and benefit from its growth.

“This is one of the first times where there is a big shift happening and Africans are able to contribute. Africans are able to benefit directly from the shift that is happening without it having to pass through an intermediary, which is usually the state. And I think it’s an amazing thing.”

The next Silicon Valley?

When asked about what it would take for countries in Africa to become “magnets for crypto builders or a new kind of Silicon Valley,” Akyaw pointed to two factors that need to be improved for developers, startups and fintech companies to want to make the continent their home: regulation and infrastructure.

The majority of African countries lack proper regulation, according to Akyaw, while also condemning the use of crypto. This means companies are often unable to obtain licenses to set up shop and residents are dissuaded from interacting with Web3 protocols and firms:

“You can’t get a license. You can’t work with a bank in the country. You can’t do a lot of things. So, it makes no sense for you to come in.”

The other thing that needs to change, said Akyaw, is that electric grids need to be more stable and internet needs to be more reliable. “If you want a lot of Big Tech companies to come in, they must have great, 24/7 electricity. Internet must be awesome because a lot of what we do in the crypto space is virtual.”

To hear more from Akyaw’s conversation with The Agenda — including his backstory, whether outside funding has any negatives and the potential near-term future of crypto in Africa — listen to the full episode on Cointelegraph’s Podcasts page, Apple Podcasts or Spotify. And don’t forget to check out Cointelegraph’s full lineup of other shows!

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Crypto-friendly banks mismanaged traditional risks, FDIC head tells Senate hearing

It all started with FTX, FDIC head Martin Gruenberg said; he emphasized that the American banking system remains sound.

The United States Senate Banking Committee held a hearing on March 28 regarding the regulatory response to recent bank failures. Officials from the Federal Deposit Insurance Corporation (FDIC), Federal Reserve and Treasury testified. FDIC chair Martin Gruenberg spoke about the causes of the failures of Silicon Valley Bank (SVB) and Signature Bank, including the role of digital assets and the agency’s responses to the crisis.

High levels of uninsured deposits and rapid growth were common factors in the bank collapses in March, Gruenberg said. Gruenberg’s narrative began with the closing of digital asset-focused Silvergate Bank, which was announced on March 8, although that story began with the bankruptcy of FTX.

FTX represented less than 10% of Silvergate Bank’s total deposits, but the bank lost 68% of its deposits in the aftermath of FTX’s bankruptcy, setting off a fatal chain of events for the bank. Gruenberg said:

“The troubles experienced by Silvergate Bank demonstrated how traditional banking risks, […] when not managed adequately, could combine to lead to a bad outcome.”

The FDIC was informed of the run on SVB on the evening of Thursday, March 9. SVB closed on March 10 and the FDIC worked with the bank throughout the weekend, succeeding in reopening the bridge bank the following Monday. Gruenberg noted that, like Silvergate Bank, SVB had concentrated its activities in a single sector — venture capital firms.

Related: Adoption and nerves — Crypto pumps amid banking crisis

Signature Bank was more diversified than Silvergate Bank or SVB. That was partly because of the bank’s decision to reduce its exposure to digital assets after the FTX bankruptcy and media scrutiny of the bank’s ties to the crypto exchange. The bank received more negative attention related to FTX in February, when it was sued for allegedly facilitating FTX’s commingling of accounts.

Deposit outflows from Signature Bank began March 9 and became acute the following day, Friday, with about 20% of deposits being withdrawn in hours. Management was unable to provide accurate financial data and the situation deteriorated. Gruenberg said:

“Resolution of the negative balance required a prolonged joint effort among Signature Bank, regulators, and the Federal Home Loan Bank of New York to pledge collateral and obtain the necessary funding from the Federal Reserve’s Discount Window to cover the negative outflows.”

“This was accomplished with minutes to spare before the Federal Reserve’s wire room closed,” he added.

Gruenberg noted that Silvergate Bank and Signature Bank used digital platforms that made it possible to carry out transactions round-the-clock. They were “the only two known platforms of this type within U.S. insured institutions.”

Gruenberg gave a preliminary estimate of $22.5 billion for the cost to the Deposit Insurance Fund for resolving SVB and Signature Bank losses. Echoing several government officials in recent days, he added:

“The state of the U.S. financial system remains sound despite recent events.”

The FDIC will release a comprehensive report on the deposit insurance system; the FDIC’s chief risk officer will release a report on the corporation’s supervision of Signature Bank by May 1. In addition, the FDIC will issue a proposal on new rulemaking on the special assessment that month.

The other speakers at the hearing gave briefer testimony. Treasury Under Secretary for Domestic Finance Nellie Liang described how the Treasury engaged with the FDIC and the Federal Reserve during the bank failures. Fed Vice Chair for Supervision Michael S. Barr discussed in fairly technical terms the failure of SVB and the subsequent steps taken by the government.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

European Banking Federation shares its vision of digital euro, wCBDC, bank tokens

The EBF calls itself the voice of the European banking sector; it expressed its support for European digital money, with suggestions of its own.

The European Banking Federation (EBF) has released a paper detailing its vision for the digital money ecosystem of the future, and the retail digital euro in particular. The carefully worded paper expressed values and concerns about the digital euro from the perspective of commercial banks. 

The paper, released on March 28, emphasized the bank’s values, such as stability and privacy. It called for closer public-private partnership in the introduction of the digital euro. “There is currently no dialogue in place to address the fundamental changes and risks to the monetary and financial system,” the paper said. At the same time, it stated that there needs to be a framework for permanent high-level engagement.

The EBF ecosystem vision emphasized the role of the private sector in all aspects, beginning with infrastructure, where Europe needs to lessen dependence on outside “actors.” That ecosystem would contain three elements: the digital euro, a wholesale central bank digital currency (CBDC) and bank-issued money tokens.

Related: ECB executive board member outlines plans for digital euro to European Parliament

In the EBF vision, the digital euro should have three levels, with a European Central Bank role and two industry levels — the first to interact with the Single Euro Payments Area and an “Industry Level B” that “would be subsequently developed and operated by the private sector, in compliance with the principles set out in the previous layers.” Those principles have yet to be developed fully. The paper continued:

“The European market needs the authorities to clarify the interaction of different and converging policy objectives, especially when it comes to the development of pan-European payment solutions at the Point of Sale / Point of Interaction.”

The paper was careful to refer to blockchain technology only in reference to certain parts of its envisioned ecosystem. A wholesale CBDC, where interoperability is key to enabling cross-border transactions with central bank money, was assumed to operate on distributed ledger technology (DLT).

In addition, bank-issued money tokens had a crucial role in the EBF vision for “business needs such as automated industrial processes that run on DLT and use smart contracts.” These tokens apparently correspond to Industry Level B of the digital euro scheme. More standardization would be needed for these solutions as well, the paper noted.

The EBF represents 33 national banking associations and 3,500 individual banks.

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