Crypto Startups Scramble for New Banks as Prominent Banking Partners Close

In the past two weeks, three significant banking partners of the crypto industry have shut down, leading many startups and investors to seek alternate banking services. Silvergate Bank, Silicon Valley Bank, and Signature Bank all closed due to various issues such as bank runs and regulatory scrutiny. Even startups with intact banking partnerships are now questioning their relationships.

According to a venture investor at a leading crypto investment firm, the closure of these banks creates serious implications for crypto. “Banking options in the U.S. are getting thin for projects in the space,” they said, adding that “it’s not good news.”

While it is unclear why these banks have shut down, it is worth noting that crypto companies are under increasing scrutiny by U.S. regulators, especially those linked to banking services. The regulatory action towards crypto companies in the U.S. has made finding banking partners a challenge. Venture investor Nic Carter has referred to the coordinated crackdown on crypto through the banking industry as “operation choke point 2.0.”

The closure of these banking partners could have broader implications for the crypto industry beyond just the difficulty of finding banking partners. It could signal a further tightening of regulations on crypto companies in the U.S., leading to a decrease in innovation and investment in the space.

While some web3 companies are still finding banking partners, openly crypto-friendly banks in the U.S. are becoming scarce. The unnamed venture investor suggests options such as Mercury, Brex, and even JPMorgan Chase. However, some of these banking options do not offer the same on and off ramps that Signature and Silvergate provided.

Multi-sig startup Den has always used Mercury as a banking partner, and the onboarding process to Mercury was a smooth process. After the recent events, Den is exploring opening accounts at similar fintech providers utilizing sweep accounts and global systemically important banks.