The U.S. banking crisis is leading crypto firms to seek offshore options in Switzerland, Lichtenstein, and other jurisdictions.
The ongoing banking crisis in the United States is prompting a number of crypto firms to look to offshore banking options, according to CoinDesk. Switzerland, Lichtenstein, and several island jurisdictions are among the potential benefactors of this trend.
Last week, three of crypto’s preferred banks in the U.S. became effectively defunct. Silvergate Bank was liquidated, whereas Silicon Valley Bank and Signature Bank were shut down by regulators. Although an interim solution for Silicon Valley Bank is a bridge bank that allows customers to use their accounts, in the long term, companies will have to move their funds to other banks. This thread provides an interesting take on the potential consequences of this crisis:
Following the collapse of three digital assets-friendly financial institutions last week, a number of U.S.-based crypto firms are seeking offshore bank accounts. Sygnum, based in Switzerland, and Bank Frick in Lichtenstein have reported an increase in requests to open accounts in the past few days from various jurisdictions, including the United States. Industry insiders have also pointed to SEBA Bank in Switzerland, FV Bank in Puerto Rico, Jewel Bank in Bermuda, as well as Tether and FTX-tied Deltec in the Bahamas as potential options for U.S. dollar-based banking. EQIBank in Dominica is also an option for banking in a list sent out to some companies in the Digital Currency Group umbrella.
Europe as a Top Destination
Europe may prove to be an attractive option due to its relative regulatory clarity, particularly as the U.S. currently lacks a regulatory framework for cryptocurrencies. Moreover, many crypto insiders no longer trust U.S. authorities. Claims that the closure of Signature Bank was part of a larger campaign against the crypto industry have raised concerns among industry participants. Dave Weisberger, CEO and co-founder of algorithmic trading platform CoinRoutes, said, “There is a very real risk that more crypto companies will move offshore,” especially in the UK and EU countries
However, regulatory pressure may continue to be a concern regardless of where U.S. crypto companies look for their banking partners. The willingness of internationally established banks to do business with U.S. crypto entities at the moment is uncertain and depends on the question of what the U.S. regulators will allow the companies to do for their banking partnerships. “Many European and Asian banks also have some U.S. presence, which could presumably put them in sight of regulators if they are banking U.S. customers via offshore entities,” noted Josh Frank, co-founder, and CEO of information platform The Tie.
Some crypto firms were already considering going offshore before the closure of these three banks, according to Frank. “Many crypto companies already had multiple on and off-shore banking partners,” he said, adding that U.S. companies are likely to prefer Caribbean and European banks first.
Focus on the Middle East
Crypto firms may look beyond Europe for their banking needs because more jurisdictions are increasingly friendly toward digital assets. Sanjay Raghavan, vice president of Web3 initiatives at real estate investment platform Roofstock onChain, pointed to the United Arab Emirates as an option, stating that the country is “embracing crypto innovation and has announced plans to launch an economic free zone dedicated to crypto and digital asset companies.”
Approval from banks in European countries will likely take longer and be more challenging. Only crypto companies that are regulated and have proper compliance and governance will be able to access non-U.S. banks, according to Henri Arslanian, co-founder and managing partner of Dubai-based Nine Blocks Capital Management.
Nicolas Marxer, head of blockchain banking at Bank Frick, says that they apply the same strict standards to crypto as they do to traditional banking. The bank reviews every new onboarding case individually and will onboard jurisdictions outside Europe if all necessary local know-your-customer and anti-money laundering standards are met.
Sygnum Bank, on the other hand, does not onboard U.S. clients, according to Martin Burgherr, the bank’s chief clients officer.
U.S. crypto firms will then choose to move offshore permanently or eventually return to the United States once there is regulatory clarity. For now, many are looking to other jurisdictions to meet their banking needs.