Banking Crisis Rocks Crypto Industry, Driving US Firms to Seek Safe Haven in Switzerland and Beyond

U.S.-based crypto firms are exploring international jurisdictions to diversify their banking partners, following the recent banking crisis that has hit the U.S. hard. With the collapse of crypto-friendly banks like Silvergate Capital, Silicon Valley Bank, and Signature Bank, U.S. firms are seeking banking partners in Europe, Asia, and the Middle East. Switzerland, famous for its banking structure and financial system, has emerged as the most viable option for U.S. firms in the short term. However, there are concerns that Swiss banks may not accept these firms, making it difficult for crypto firms to access lenders in the United States.

Exploring Diversification in International Jurisdictions:

The recent banking crisis in the U.S. has caused alarm among U.S.-based firms, prompting them to explore diversification in international jurisdictions. The collapse of Silvergate Capital, coupled with the failure of crypto exchange FTX in November 2022, has affected stablecoin reserves and caused further contagion in the financial sector. U.S. regulators are pushing companies and banking institutions to break partnerships, which may push companies to seek banking partners in Europe, Asia, and the Middle East.

Switzerland: The Most Viable Option Switzerland has been a welcoming country in Europe for the crypto industry, given its private banking system. The famous “Crypto Valley” located in Zug is one of the more welcoming countries in Europe for the crypto industry. Yves Longchamp, managing director of crypto-focused SEBA Bank in Switzerland, reported an uptick in traffic from the United States. Representatives from the bank’s Singapore, Hong Kong, Abu Dhabi, and Switzerland offices also reported increased interest from potential clients involved in the U.S. banking crisis.

The Middle East, Dubai, in particular, has become a hotspot for crypto firms looking for a way out of the crisis in their home country. Hong Kong and Europe have become more attractive to the industry as well, given their pro-regulatory efforts and governments’ willingness to welcome the nascent financial sector.

“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.

Other Jurisdictions Offering Banking Services for Crypto Firms Rani, a crypto expert, claims that he does not see any bank offering the structure that Signature Bank and Silvergate offered with their internal 24/7 blockchain settlement network. It remains to be seen if other jurisdictions will offer the same banking services for crypto firms.

Effects of Banking Crisis:

The banking crisis has spread offshore, affecting European banks as well, with investors dumping European bank stocks for the third day in a row. Meanwhile, U.S. banks reportedly lost about $90 billion in market value on Monday amid growing investor concerns.

The crypto total market capitalization has surpassed the $1 trillion mark. Although stablecoin reserves have been affected by the financial crisis, the crypto market continues its upward trajectory with sights set on new annual highs.