[Feature] Three Crypto-Friendly Banks Collapse, What Crypto-Friendly Banks are Left in the U.S.?

Last Wednesday, Silvergate Capital announced the end of its operations and began its final liquidation; last Friday, SVB (Silicon Valley Bank) announced its closure after suffering a run on deposits of $42 billion; and on March 12, Signature Bank was directly closed by regulatory authorities.

Amid this series of blows, Bitcoin fell to below $20,000, and USDC experienced a brief "unpegged" fluctuation. After emergency measures were taken to stabilize the market, the overall market has now rebounded. However, more severe tests have arrived.

More and more banks will distance themselves from the cryptocurrency market under the dual pressure of market volatility and regulatory tightening. As an important channel for deposits and withdrawals, which crypto-friendly banks are currently available in the United States?

The impact of the FTX and SVB incidents
The United States was once the most crypto-friendly economy for banks. The Block compiled a list of crypto-friendly banks in 2020, including top-tier banks such as JPMorgan Chase, as well as traditional community retail banks such as Silvergate Capital and Signature Bank.

However, the collapse of FTX changed everything. In January 2023, the three US banking regulatory agencies, the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC), jointly issued a statement urging banks to refrain from participating in crypto-related businesses and to strictly scrutinize the compliance of all their operations.

Against this backdrop, multiple banks with close ties to the crypto industry, especially FTX, have chosen to withdraw from the crypto market.

Crypto-friendly banks that will exit
JPMorgan Chase
JPMorgan Chase launched its Onyx system, which allows for instant transfer and settlement of multiple banks and multi-currency assets on a permissioned distributed ledger. In February 2022, JPMorgan Chase went live on Decentraland, becoming the first bank to set up services in the metaverse. Additionally, it has focused on providing cryptocurrency payment services, such as cryptocurrency payment processing, blockchain technology solutions, and more.

However, in March 2023, JPMorgan Chase announced the termination of its relationship with the cryptocurrency exchange Gemini, which was later denied by Gemini. Coinbase also stated that it will continue to cooperate with JPMorgan Chase.

Metropolitan Bank Holding Corp
On January 9, 2023, Metropolitan Bank Holding Corp chose to fully exit the crypto market, with crypto business accounting for 1.5% of its operating income and crypto deposits representing 6% of total deposits. It plans to end its business relationship with its last four crypto customers in 2023.

Since 2019, Metropolitan Bank has claimed that it has not attracted new cryptocurrency clients but wishes to retain the deposits of its existing cryptocurrency customers. Following the issuance of regulatory documents, it is expected to completely exit the crypto market.

Moonstone Bank (Farmington State Bank)
As of January 2023, Moonstone Bank had about dozens of cryptocurrency clients, and all cryptocurrency accounts have been effectively closed.

One year ago, in January 2022, Moonstone received a $11.5 million investment from SBF's Alameda Research. In the Bahamas, clearing agents found that Moonstone held nearly $50 million in FTX deposits in two accounts, the status of which is currently unknown. According to a motion submitted by Bahamian clearing agents in December 2022, Moonstone's executives refused to provide detailed information about the accounts to investigators.

Currently, Moonstone has announced that it is "returning to its original mission as a community bank and ceasing its pursuit of an innovation-driven business model, no longer providing banking services to the cryptocurrency industry."

Provident Bank
The main body responsible for cryptocurrency business at Provident Bank is BankProv, whose business direction in the cryptocurrency field is mainly mining. It provides services such as deposit and loan usage, wire transfers, ACH transfers, real-time payments, and remote deposit for cryptocurrency companies. In addition, it provides API connections to BankProv for cryptocurrency companies through the startup Treasury Prime.

As of the end of 2022, its cryptocurrency mining loan portfolio decreased to $41 million, or a 50% decrease. It had a loss of $27.5 million in Q3 2022, so BankProv will gradually withdraw from the cryptocurrency mining loan business.

Evolve Bank & Trust
In addition to FTX's "implications," BlockFi also severely harmed Evolve Bank & Trust. Evolve previously issued credit cards to BlockFi's customers and had a certain risk exposure to FTX.

Evolve stated that it did not provide loan services to FTX or its affiliates and did not invest in or trade cryptocurrencies.

In addition to the four banks mentioned above that are wavering in their stance towards cryptocurrency, there are still several truly crypto-friendly banks that are moving forward with the cryptocurrency industry.

Cryptocurrency-friendly banks still holding on
The Bank of New York Mellon
The Bank of New York Mellon is the world's largest asset custodian, currently holding over $43 trillion in traditional assets and clearing over $2 trillion in daily transactions. It is also the exclusive settlement agent for U.S. government bonds.

In March 2022, the stablecoin USDC issuer chose BNY Mellon as its custodian and settlement agent after Signature Bank closed. Circle will use BNY Mellon for settlement.

Customers Bank
Customers Bank uses its proprietary CBIT token to exchange US dollars between customers. The CBIT token can be used in conjunction with the TassatPay payment platform, which is a blockchain-based B2B instant transfer system.

Thanks to the real-time and secure nature of blockchain transactions, the bank can absorb benefits from a large amount of low-cost deposits, providing tremendous liquidity and expanded net interest margins to drive positive loan growth. In the Q3 2021 earnings report, the bank announced $1.5 billion in deposits from cryptocurrency businesses.

Following the FTX incident, Customers Bank announced that it has no deposits or other business dealings with FTX or any affiliated companies and has not provided loans to any clients in the confidential industry.

After SVB and Signature Bank collapsed, the USDC issuer Circle still holds some reserves at Customers Bank.

Cross River Bank
In April 2022, Cross River Bank completed a $620 million funding led by a16z. Its main business module is Banking as a Service (BaaS). BaaS components cover payments, including card swipes, account transfers, and real-time payments. It can provide services for current deposit accounts, savings accounts, and credit and debit cards.

Both Coinbase and Circle are its customers. Circle announced on March 13, 2023 that Cross River Bank will provide customers with USDC minting and redemption services after SVB.

Pathward
Similar to Cross River Bank, Pathward is also a bank that provides BaaS (Banking as a Service). It has a closer partnership with Coinbase and is also a collaborative issuer of Coinbase Card, providing related services for credit card issuance.

Pathward is also an FDIC registered bank that provides deposit insurance services for deposits under $250,000.

Indirect Access to Crypto-Friendly Banks
In addition to banks that directly offer services to cryptocurrency businesses or customers, there exists a special banking system that engages with crypto enterprises through indirect or collaborative means.

First Foundation Bank
First Foundation Bank collaborates with NYDIG to allow users to trade Bitcoin through an application. Customers can buy, sell, and hold Bitcoin, but they do not truly own any specific, identifiable Bitcoin on the blockchain. Instead, a specific amount and equity of Bitcoin is reflected in their personal NYDIG Bitcoin account.

At the same time, NYDIG transfers all proceeds from customers' Bitcoin sales to the bank, and the bank deposits the Bitcoin sales proceeds into the personal account of your choice at First Foundation Bank to complete the transaction.

Sutton Bank
Sutton Bank issues prepaid cards that support CashApp, indirectly supporting cryptocurrency services. However, the official statement notes that Sutton Bank is only the card issuer, and users can use the funds in the card through CashApp on their own, but any transaction history within the app cannot be queried through online banking.

Regarding Robinhood's debit card, Sutton does not assume any customer support functions and the use of the card is solely governed by Robinhood's terms and conditions.

Quontic Bank
Quontic Bank rewards customers with Bitcoin, in USD denomination, as a full-amount rebate for card spending. The minimum deposit requirement for users is $500, and 1.5% of the USD-denominated Bitcoin for each spending transaction is accumulated as a reward. However, ATM withdrawals, transfers, bill payments, ACH payments, and wire transfers do not earn Bitcoin rewards.

Conclusion: Beyond the Bankruptcy
The recent banking bankruptcy not only affected the US banking system itself but also caused some impact on other regional banking systems. Due to regulatory policies, not all banks can involve USD services, but there is still some hope, especially for some European banks, such as SEBA and Sygnum, two major cryptocurrency-friendly banks, as well as traditional large banks like Vontobel and Swissquote.

There are also a number of small European countries, such as LHV Pank in Estonia, Gorenjska Banka in Slovenia, Bank Frick in Liechtenstein, and BlueOrange Bank in Latvia.

As well as island countries, such as Pacific Private Bank in Vanuatu, Deltec Bank and Ansbacher in the Bahamas.

Overall, the US banking industry will undergo a large-scale shift. In 2020, the OCC (Office of the Comptroller of the Currency) launched a payment charter, allowing cryptocurrency companies like Kraken/Paxos to enter the national financial system.

However, with the FTX bankruptcy and the collapse of three banks last week, regulatory policies have already intervened in the banking system. Whether banks will embrace cryptocurrency companies again in the future remains to be seen.