crypto banks

Blockchain Association files further FOIA requests over banking closures

The crypto advocacy group wants clarity on recent regulatory action against digital asset-friendly banks.

More Freedom of Information Act requests seeking information on recently closed crypto-friendly banks have been submitted by cryptocurrency advocacy group the Blockchain Association to two regulators.

On April 14, the association said that it had filed Freedom of Information Law requests to the Federal Housing Finance Agency and the New York Department of Financial Services, a little over a month after initially filing for further information from the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency.

The organization is seeking further information on the de-banking of crypto companies following the seizure of Signature Bank and the failure of Silvergate Bank.

The BA said that its request to the NYDFS was to:

“Seek to understand whether the closure of Signature Bank was the result of the bank’s insolvency or a decision to send an anti-crypto message despite the bank being fully solvent.”

The association also reported that it was investigating whether the failure of Silvergate “was the result of a politically-motivated decision by the Federal Home Loan Bank of San Francisco, which is overseen by the FHFA, to take the extraordinary and unusual action of pulling a loan made to Silvergate only months earlier.”

In early March, Silvergate’s parent company announced it would “wind down operations” for the crypto and tech-focused bank. Its peer, Silicon Valley Bank, collapsed on March 10 following a bank run. The Treasury, Federal Reserve, and other agencies closed Signature Bank on March 12.

On April 16, the Blockchain Association and the DeFi Education Fund filed a brief in a United States District Court over the sanctioning of Tornado Cash.

Related: Crypto regulation decided by Congress, not the SEC: Blockchain Association

The Blockchain Association is an advocacy and lobbying group for the crypto sector, with around a hundred members that include industry executives, investors, companies, organizations, and projects.

In 2022, the association spent $1.9 million lobbying the U.S. government, according to campaign finance data firm OpenSecrets.

Cointelegraph contacted the Blockchain Association for further details but did not immediately receive a response.

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‘Nobody left to bank crypto companies’ — Crypto Twitter reacts

Prominent members of the crypto community have expressed uncertainty after the loss of crypto friendly banks.

Crypto companies could find it harder to access traditional banking partners with the loss of two major crypto-friendly banks in less than a week, according to some in the crypto community. 

On March 12, the Federal Reserve announced the closure of Signature Bank as part of “decisive actions” to protect the U.S. economy, citing “systemic risk.” It came only days after the closure of Silicon Valley Bank, which was ordered to shut down on March 10.

A week prior, Silvergate Bank, another crypto-friendly bank, announced it would close its doors and voluntarily liquidate on March 8.

At least two of these banks were seen as important banking pillars for the crypto industry. According to insurance documents, Signature Bank had $88.6 billion in deposits as of Dec. 31.

Crypto investor Scott Melker, also known as The Wolf Of All Streets, believes — like many others who took to Twitter following the news — that the collapse of the three banks will leave crypto companies “basically” without banking options.

“Silvergate, Silicon Valley and Signature all shuttered. Depositors will be made whole, but there’s basically nobody left to bank crypto companies in the US,” he said.

Meltem Demirors, chief strategy officer of digital asset manager Coinshares, shared similar concerns on Twitter, highlighting that in just one week, “crypto in america has been unbanked.” She noted that SEN and SigNet “are the most challenging to replace.”

The Silvergate Exchange Network (SEN) and Signature Bank’s “Signet” were real-time payment platforms that allowed commercial crypto clients to make real-time payments in dollars at any time.

Their loss could mean that  “crypto liquidity could be somewhat impaired,” according to comments from Nic Carter of Castle Island Ventures in a March 12 CNBC report. He said that both Signet and SEN were key for firms to get fiat in, but hoped that other banks would step up to fill the void.

Others believe the closure of the three firms will create room for another bank to step up and fill the vacuum. 

 Jake Chervinsky, head of policy at crypto policy promoter the Blockchain Association, said the closure of the banks would create a “huge gap” in the market for crypto-friendy banking. 

“There are many banks that can seize this opportunity without taking on the same risks as these three. The question is if banking regulators will try to stand in the way,” he added.

Meanwhile, others have suggested there are already viable alternatives out there.

Mike Bucella, General Partner at BlockTower Capital, told CNBC many in the industry are already changing to Mercury Bank and Axos Bank.

“Near-term, crypto banking in North America is a tough place,” he said.

“However there is a long tail of challenger banks that may take up that slack.”

Ryan Selkis, CEO of blockchain research firm Messari, noted the incidents have seen “Crypto’s banking rails” shuttered in less than a week, with a warning of the future for USDC.

“Next up, USDC. The message from DC is clear: crypto is not welcome here,” he said.

“The entire industry should be fighting like hell to protect and promote USDC from here on out. It’s the last stand for crypto in the US,” Selkis added.

Circle, the issuer of the stablecoin USDC, confirmed on March 10 that wires initiated to move its balances at Silicon Valley Bank had not yet been processed, leaving $3.3 billion of its $40 billion USDC reserves at SV.

Related: Silicon Valley Bank collapse: Everything that’s happened until now

The news prompted USDC to waver against its peg, dropping below 90 cents at times on major exchanges.

However, as of March 13, USDC was climbing back to its $1 peg following confirmation from CEO Jeremy Allaire that its reserves are safe and the firm has new banking partners lined up.