Firms May Drift Away From the U.S. Amid Crypto Banking Woes

Danny Talwar, Head of Tax at Koinly, a tax solution for cryptocurrency investors and accountants, predicts that the recent de-banking exercise going on amongst crypto-related banks in the United States may have dire consequences.

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The basis for his prediction is the fact that most crypto businesses, firms, and exchanges had their funds customized in these banks. As it stands now, they would have to find alternative financial providers.

“The setbacks following the failure and shutdown of many crypto-friendly banks like Silvergate, SVB, and Signature Bank may push the sector back a decade. In the medium run, this will combine with the more crypto-native collapses from the past year, making innovation in the US very difficult,” He said.

Banking Collapse Startle Crypto Industry

It started last week with Silvergate Bank voluntarily liquidating its assets and deciding to shut down operations.

According to the crypto-friendly bank, the crypto winter and market instability followed by the implosion of top crypto exchanges have caused huge amounts of deposits in the bank to be withdrawn. Before this time, the bank had already suspended its exchange network for digital assets. 

A few days later, Silicon Valley Bank (SVB) was next in line as its UK branch was closed down by the Bank of England (BoE) citing a “limited presence” in the country. Immediately after this news went public, USDC issuer Circle and defunct crypto lender BlockFi announced that they have funds tied up in the now-closed bank. Meanwhile, BoE assured that eligible customers will be compensated up to a stated amount.

Signature Bank also crashed almost at the same time as SVB. A while ago, some U.S. officials suggested that traditional banks stay away from crypto companies.

Precisely, Silvergate was criticized for doing business with now-bankrupt FTX and its sister trading firm Alameda Research. The Federal Deposit Insurance Corporation (FDIC) did not also fail to voice its skepticism about the nascent industry.

Today, the table has turned as crypto firms are now looking to sever ties with traditional banking organizations. Cardano boss Charles Hoskinson supported this movement as he took to Twitter to emphasize the need for an alternative finance provider.

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