USDC Stablecoin Issuer Befriends Cross River Bank

2023-03-31, 09:09

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![](https://gimg2.gateimg.com/blog/1679447253155655279redian.jpeg)
## [TL; DR]
The collapse of Silicon Bank, Silvergate Bank and Signature Bank has left a void in the banking sector since very few banks offer services required by crypto firms.

Bank of New York Mellon and Cross River Bank are examples of banks that offer limited crypto-related services.

Deutsche Bank (DB), Santander (SAN), HSBC (HSBA), Western Alliance, Mercury, Series Financial Multis, Bank Prove and Bridge have shown interest in offering the services that crypto companies prefer.

Countries like the United States have heightened their regulatory oversight following a series of crypto thefts and crimes as well as the crashing of crypto projects such as FTX.

## Introduction 
The collapse of three key banks that supported cryptocurrencies in the United States has disrupted the way crypto investors do their businesses. The closure of Silicon Bank, Silvergate Bank and Signature Bank in quick succession affected the liquidity in the crypto sector. This is because Silvergate provided the infrastructure that supported the crypto sector on a daily basis.

## The venture capitals that were affected
The crashing of these three banks meant that several tech and venture firms cannot  get the services which they want. For example, Silicon Valley Bank was a lender to many startup firms. On the other hand, most crypto firms and venture-backed startups banked with Silvergate Bank and Signature banks. Therefore, their collapse has left a void in the crypto sector. As a result, these crypto firms have to look for suitable banks that meet their special demands and preferences.

Major crypto firms such as Finance.US, Kraken, and Gemini banked with Silvergate Bank and Signature banks. On the other hand, digital asset companies, venture capitals and tech firms like Circle, Trace Finance, Roku, BlockFi and Roblox banked with Silicon Valley Bank (SVB).

![](https://gimg2.gateimg.com/image/article/1680253626641680253569_.pic.jpg)
Silicon Valley Bank- NPR.org

The closure of these important financial institutions in the United States could be a deliberate move by the government to stop crypto firms from accessing reliable banking service in a bid to disrupt their activities. However, it seems there are other banks, such as Cross River Bank-the New Jersey-based financial institution- that are willing to serve the crypto sector.

## Cross River Bank seems a natural move
After the closure of Silvergate Bank and Silicon Valley Bank, Circle, a peer-to-peer payments technology company and the issuer of <a href="/id/price/usd-coin-usdc" target="_blank" class="blog_inner_link">USD Coin</a> (USDC) partnered Cross River Bank to make sure that the stablecoin maintains a 1.1 peg with the United States dollar. Already, Cross River Bank is working with other crypto firms including Coinbase exchange.

Circle wants to continue with the automated minting and redemption of USDC. Before the new banking partnership Circle used to have a work relationship with Silicon Valley Bank where it had locked $3.3 billion. Sadly, USDC depegged on 11 March, forcing Circle to burn $2.34 billion in USDC to maintain its peg against the United States dollar.

Posting on Twitter, Jeremy Allaire, the co-founder and CEO of Circle said that the company has chosen Cross River Bank to ensure the clients’ funds remain safe in USDC. Basically, Circle avoids fractional reserve banking as it exposes its stablecoin, USDC, to risks.

Also, it is important for Circle to forge a partnership with a reliable bank to avoid the depegging of USDC. Recently, when it announced its exposure to Silicon Valley Bank the USDC depegged to as low as $0.87. However, the stablecoin has already regained its peg.

Additionally, it is essential to understand that Circle is not limiting its partnership in the banking sector to Cross River Bank. It also has an existing banking relationship with the Bank of New York Mellon (BNY Mellon) which has already offered custody services to Circle’s assets. Recently, Circle announced that it has transferred the cash that had remained in Silicon Valley Bank to Cross River Bank.

There are strong reasons that Circle chose to do business with Cross River Bank. First, the bank is backed by several venture capitalists that have an interest in digital assets such as KKR, Ribbit Capital, Andreessen Horowitz and Battery Ventures. It also has working financial relationships with crypto-exposed firms like Stripe and Affirm. Further to this, it has a strong backing in the form of JPMorgan and Pathword where it deposits its customers’ funds.

## What is Cross River Bank?
Now that we have discussed how Cross River Bank is supporting crypto services, let’s understand what it is and what it offers.

Cross River Bank is an FDIC insured bank, based in New Jersey, that offers various banking services to  customers that include crypto firms. It has the necessary infrastructure to offer loans and facilitate crypto-to-fiat conversions. After the closure of Silvergate Bank, Silicon Valley Bank and Signature Bank many institutions that provide crypto services have opted to establish partnerships with it.

## Other banks that can support institutions dealing with digital assets
Apart from Cross River Bank and Bank of New York Mellon, there are other banks that offer banking services to crypto firms.

According to the Digital Currency Group (DCG), one of the biggest crypto organizations that is looking for potential banking partners, there are many banks that are willing to offer crypto related services. These include but are not limited to Deutsche Bank (DB), Santander (SAN), HSBC (HSBA), Western Alliance, Mercury, Series Financial Multis, Bank Prove and Bridge.

![](https://gimg2.gateimg.com/image/article/1680253696651680253579_.pic.jpg)
Digital Currency Group - Cryptotimes

Already, Western Alliance and Bridge Bank are negotiating with crypto firms that want their banking services like third-party wire services, money markets and restricted brokerage.  Other crypto-friendly banks are First Foundation Bank, Sutton Bank, Quontic Bank, Customers Bank, Evolve Bank & Trust and Cermak.

## Regulatory scrutiny
Following the collapse of several banks that offered various crypto-related services there is an increase in the regulatory oversight in the United States. For example, the OCC recently [said](https://www.occ.gov/news-issuances/news-releases/2021/nr-occ-2021-121.html "said") that national banks should “demonstrate that they have adequate controls in place before they can engage in certain cryptocurrency, distributed ledger, and stablecoin activities.”

Currently, there is a proposal to expand the custody rule into a “safe keeping rule” which requires “the use of a qualified custodian for all customer assets (including, explicitly, digital assets), rather than only for customer assets that constitute “customer securities” or “customer funds.”

The collapse of FTX and the high incidences of crypto thefts and other crimes in 2022 have heightened the need for closer regulatory scrutiny.

## Conclusion
The evolving crypto environment has shown that there are various banks that are willing to offer crypto related services. This follows the crashing of three banks, Silvergate Bank, Silicon Valley Bank and Signature bank,that offered crypto-to-fiat conversion services. For instance, Circle has partnered with Cross River Bank and Bank of New York Mellon to get the banking services it requires.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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