U.S. Crypto Firms Seek Swiss Banking Partners Amid Banking Meltdown

U.S.-based crypto firms are trying to open Swiss bank accounts after the collapse of two U.S. crypto-focused banks made it harder for them to use lenders in the United States, but bankers said the Swiss firms may not take them.

Crypto-focused U.S. bank Silvergate Capital Corp said it planned to close last week after it was hit with losses following the dramatic collapse of crypto exchange FTX in November last year.

Its closure was followed by the collapse on Sunday of Signature Bank -- seen as U.S. crypto firms' main alternative to Silvergate -- in one of the largest failures in U.S. banking history.

The global banking sector was thrown into turmoil by Friday's collapse of Silicon Valley Bank, which sent global bank stocks plunging on Monday on concern about further contagion. The tech-focused lender also banked crypto companies and was the second-biggest U.S. bank failure.

Crypto analysts said that the U.S. bank closures, along with a regulatory crackdown in the U.S., would push firms to seek banking partnerships in Europe, Asia, and "offshore".

"U.S. regulators have issued multiple warnings to banks about potential risks of working with crypto companies. They haven't banned it explicitly but made it clear this would be frowned upon," said Ivan Kachkovski, crypto and FX analyst at UBS.

"This is likely to push crypto companies to other jurisdictions in search of non-U.S. banks willing to work with the industry."

Switzerland, long famous for its private banking sector, has also been one of the more welcoming countries in Europe for crypto firms, with the Swiss city of Zug dubbed "The Crypto Valley."

Yves Longchamp, managing director of crypto-focused SEBA Bank in Switzerland said there had been a "pronounced uptick" in traffic to the bank's website from the U.S., and that in a global call on Friday representatives from the Singapore, Hong Kong, Abu Dhabi, and Switzerland offices all said they'd seen increased interest from prospective clients.

"Crypto firms and other money managers have already started the onboarding process and many calls are scheduled next weeks," he said via email.

Switzerland-based Arab Bank said it saw an increase in U.S. firms, mostly crypto funds or involved in crypto venture capital, seeking to open accounts in the last few weeks as doubts about Silvergate grew. Rani Jabban, head of treasury and financial institutions at Arab Bank, said around 80% of them had been Silvergate customers.

"We had 10-20 enquiries so far... but that doesn't mean that we can cater and open accounts for all of them," he said, citing regulatory difficulties of onboarding U.S.-based clients and estimating that only one or two of them would ultimately become Arab Bank customers.

Crypto firms relied on Silvergate's crypto payments network, the Silvergate Exchange Network, which allowed round-the-clock transfers between investors and crypto exchanges, unlike traditional bank wires, which can often take days to settle.

"I don't see any banks also offering the structure that Signature and Silvergate were offering with their internal blockchain 24/7 settlement," Arab Bank's Rani said.

Swiss bank Sygnum, which describes itself on its website as "the world's first digital asset bank", is sticking to its policy not to take on U.S. clients "due to a lack of regulatory clarity" Sygnum's chief marketing officer Dominic Castley told Reuters via email.