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Blockchain Association files further FOIA requests over banking closures

The crypto advocacy group wants clarity on recent regulatory action against digital asset-friendly banks.

More Freedom of Information Act (FOIA) requests seeking information on recently closed crypto-friendly banks have been submitted by cryptocurrency advocacy group the Blockchain Association (BA) to two regulators.

On April 14, the Association said that in addition to the FOIA requests, it has also filed Freedom of Information Law (FOIL) requests to the Federal Housing Finance Agency (FHFA) and the New York Department of Financial Services (NYDFS).

The organization is seeking further information on the de-banking of crypto companies following the seizure of Signature Bank and the failure of Silvergate Bank.

The BA said that its request to the NYDFS was to:

“Seek to understand whether the closure of Signature Bank was the result of the bank’s insolvency or a decision to send an anti-crypto message despite the bank being fully solvent.”

The Association also reported that it was investigating whether the failure of Silvergate “was the result of a politically-motivated decision by the Federal Home Loan Bank of San Francisco, which is overseen by the FHFA, to take the extraordinary and unusual action of pulling a loan made to Silvergate only months earlier.”

In early March, Silvergate’s parent company announced it would “wind down operations” for the crypto and tech-focused bank. Its peer Silicon Valley Bank collapsed on March 10 following a bank run, and the Treasury, Federal Reserve, and other agencies closed Signature Bank on March 12.

The Association initially filed for further information from the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (OCC) regarding the de-banking on March 16.

On April 16, the Blockchain Association and the DeFi Education Fund filed a brief in a United States District Court over the sanctioning of Tornado Cash.

Related: Crypto regulation decided by Congress, not the SEC: Blockchain Association

The Blockchain Association is an advocacy and lobbying group for the crypto sector, with around a hundred members that include industry executives, investors, companies, organizations, and projects.

In 2022 the Association spent $1.9 million lobbying the U.S. government according to campaign finance data firm OpenSecrets.

Cointelegraph contacted the Blockchain Association for further details but did not immediately receive a response.

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Binance.US Relying on Middleman To Store User Funds As Crypto Exchange Struggles To Find Banking Partner: Report

Binance.US Relying on Middleman To Store User Funds As Crypto Exchange Struggles To Find Banking Partner: Report

The US arm of leading crypto exchange Binance is reportedly searching for a new banking partner after Silvergate Capital and Signature Bank collapsed last month. The Wall Street Journal reports that Binance.US is struggling to find a bank that will directly hold its customers’ cash following the failure of Signature and Silvergate, which were the […]

The post Binance.US Relying on Middleman To Store User Funds As Crypto Exchange Struggles To Find Banking Partner: Report appeared first on The Daily Hodl.

Does Ross Ulbricht’s pardon change the narrative of Bitcoin as a crime tool?

Binance.US unable to find bank partners in the United States: Report

The United States arm of global crypto exchange Binance has been facing challenges in establishing a new bank partner.

The United States arm of global crypto exchange Binance has been facing challenges in establishing a new bank partner to serve as a fiat on-ramp and off-ramps for its clients in the country, according to a Wall Street Journal report on April 8. 

The recent failures of Silvergate and Signature Bank left Binance.US without banking services, depending on middleman's banks to store funds on its behalf, according to the WSJ, citing "people familiar with the matter".

The regulatory crackdown on banks with crypto clients is also another factor contributing to the exchange's struggles. In March, the U.S. Commodity Futures Trading Commission (CFTC) sued Binance Holdings and its CEO Changpeng “CZ” Zhao for allegedly trading violations. The cryptocurrency exchange has been the focus of a CFTC investigation since 2021.

Related: Binance CEO CZ rejects allegations of market manipulation

Binance.US needs a bank to directly hold its client's US dollars, but recent attempts to establish direct banking relationships with banks, such as Cross River Bank and Customers Bancorp, have failed.

Binance.US customers have been affected by the lack of a direct bank. In a recent status update, the exchange said that it "was transitioning to new banking and payment service providers over the next several weeks," adding that some USD deposit services would be temporarily impacted during the transition.

Binance.US status update on USD deposit services. Source: Binance.US

Currently, Binance.US is holding customer funds via financial technology firm Prime Trust. A spokesperson for Prime Trust stated that all funds received from clients are stored through its banking partners.

“We work with multiple U.S.-based banking and payment providers and continue to onboard new partners while upgrading our internal systems to create a more stable fiat platform and offer additional services,” a spokesman for Binance.US told the WSJ.

Binance.US is operating in a similar environment to that which crypto firms are experiencing in the United Kingdom, where banks are moving away from accepting clients from the crypto sector. The few banks still working with crypto firms in the U.K. are requesting more documentation and information about how they monitor clients’ transactions.

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Tether supply hits $80B for the first time since May 2022 — stablecoin rivals stumble

Tether supply across cryptocurrency exchanges has dropped 28% in 2023, however, hinting at an overall decline in demand for stablecoins.

Tether (USDT) continues to benefit from the ongoing turmoil in the U.S. dollar-backed stablecoin industry with its market capitalization growing significantly in Q1 2023 at other stablecoins' expense.

Tether market cap reaches $80 billion

On April 6, the circulating market cap of USDT surpassed $80 billion for the first time since May 2022 with a gain of $15 billion so far in 2023.

USDT circulating market cap 12-month performance. Source: Messari

On the other hand, the market caps of its chief rivals, namely USD Coin (USDC) and Binance USD (BUSD), fell by about $12 billion and $9.4 billion, respectively.

USDC and BUSD circulating market cap year-to-date performance. Source: Messari

Tether benefits from non-U.S. status

Crypto traders opted for Tether given the growing concerns around USD Coin and Binance USD.

Notably, USDC market capitalization slipped due to its $3.3 billion exposure to the now-collapsed Silicon Valley and Silvergate banks. While BUSD suffered after New York regulators ordered Paxos to shut down the stablecon's issuance.

USDC weathered the crisis after the Federal Deposit Insurance Corporation's assurance that they would make depositors at the insolvent banks whole. As a result, the stablecoin recovered its dollar peg after losing it at the peak of the banking crisis in mid March. 

USDC price performance YTD. Source: Messari

But a growing crypto crackdown in the U.S. has prompted investors to maintain distance from regional firms. For instance, Paxos confirmed that the Securities and Exchange Commission (SEC) treats BUSD as an unregistered security.

On the other hand, Tether is a non-U.S. firm and has repeatedly assured that it has no exposure to insolvent U.S. banks. Nonetheless, it keeps facing constant scrutiny over its reserve assets and lack of proper audits for years, despite such issues becoming less of a concern among traders.

USDT supply drops across exchanges

Interestingly, the growth in the USDT circulating supply has coincided with a drop in its supply across exchanges.

Related: USDT issuer Tether has up to $1.7B in excess reserves, CTO says

Tether's balance on exchanges has dropped 28% YTD to 12.88 billion USDT, according to Glassnode. In comparison, the aggregated stablecoin balance across exchanges has dropped by 41% YTD to $22.31 billion.

USDT vs. rival stablecoin balances across crypto exchanges. Source: Glassnode

The decline in stablecoin reserves coincides with a crypto market rally, suggesting that traders have been converting their crypto dollars to buy Bitcoin (BTC) and Ether (ETH).

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Does Ross Ulbricht’s pardon change the narrative of Bitcoin as a crime tool?

Tether ‘unequivocally reiterates’ no exposure to Signature Bank

The stablecoin provider denied the allegations that began to surface in regard to its exposure to the now-collapsed Signature Bank.

After a Bloomberg article alleged exposure between stablecoin provider Tether and the now-collapsed Signature Bank, rumors began to circulate regarding the involvement between the two companies. 

However Tether immediately reached out to clarify the claims made in the original article. In an email sent to Cointelegraph among other outlets, Tether gave an official response to the situation in which it said it wants to “unequivocally re-iterate that it has no exposure to Silvergate, Silicon Valley Bank and Signature Bank.”

The stablecoin issuer went on to highlight a section of the article that pointed out no issue of a collaboration between Tether and Signature Bank, and that it “failed” to explain that there was no account set up.

Cointelegraph reached out to Tether for further clarification on the situation.

Initial claims in the article said that Tether was gaining access to the United States banking system through Signature by encouraging users to send U.S. dollars via Signature’s Signet to its Bahamian partner Capital Union Bank.

These claims from Bloomberg surfaced despite the fact that Tether chief technology officer Paolo Ardoino took to Twitter on March 12 to clarify that the company had zero exposure to Signature Bank. On March 2 and 10 he tweeted that the company had no exposure to Silvergate and Silicon Valley Bank (SVB), respectively.

Related: Tether CTO on USDC depeg: ‘Bitcoin maxis were right all along’ | PBW 2023

At the recent Paris Blockchain Week 2023 event, Ardoino told Cointelegraph that Tether has around $1.7 billion in excess reserves. He continued to call USDT (USDT) one of the “safest assets to hold in the world” in the aftermath of the banking crisis.

This comes after Tether came back at the Wall Street Journal’s ‘stale allegations’ on March 3 that the company faked documents to open bank accounts. The report alleged that Tether faked sales invoices, transactions and hid behind third parties to have opportunities to open bank accounts it couldn’t have otherwise.

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How the Federal Reserve Is Now Competing With Banks for Deposits: Enter the Reverse Repo Facility

How the Federal Reserve Is Now Competing With Banks for Deposits: Enter the Reverse Repo FacilityThe U.S. Federal Reserve could be competing with commercial banks due to a facility called the “overnight reverse repurchase agreement facility,” which has currently drawn in more than $2 trillion in deposits. According to analysts, this has affected bank deposits, as investors run to grab the higher yields it offers compared to traditional banks. The […]

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Stablecoins are solution to crypto’s banking problem, exec says

Stablecoins are seen as a potential solution to crypto’s banking problem, but some of them are currently not immune to banking issues.

The collapses of banks like Silvergate have certainly impacted cryptocurrency exchanges but there are ways for the industry to survive without the support of banks, one executive believes.

Crypto exchanges significantly rely on traditional banking systems for customer deposits, which makes them vulnerable to various banking issues, according to Bitstamp USA CEO and global commercial officer Bobby Zagotta.

The executive believes that stablecoins — cryptocurrencies whose value is tied to fiat currencies or other assets — could be a solution to crypto’s banking problem.

“We are currently discussing how stablecoins can offer us an alternative to traditional banking,” Zagotta said in an interview with Cointelegraph on March 27. He added that stablecoins could potentially unlock new capabilities for the industry, allowing it to look at banking from a new perspective and to go back to the genesis and purpose of crypto, adding:

“One of the founding principles of our industry is to enable individuals to transact without dependence on third-party institutions, so there are other possibilities to be explored, such as the use of stablecoins to reduce frictions born of the banking system.”

According to Zagotta, stablecoins provide many benefits like faster and more cost-effective transactions, reduced reliance on banks and increased liquidity. “Depending on regulations it's possible we will see a continued evolution and integration of stablecoins within exchanges amid the banking crisis,” the exec stated.

In the interview, Zagotta emphasized that the crypto industry needs to figure out the factors that led regulators to step in at Signature bank. That is necessary for the industry to ensure that crypto-friendly banks are operating in a safe and sustainable manner moving forward. He also cautioned exchanges against creating more risk for customers by hastily moving customer funds around different U.S. banks that may be stressed or at risk.

Related: Coinbase wants devs to build inflation-pegged ‘flatcoins’ on its new ‘Base’ network

According to the exec, Bitstamp currently has 15 banking partnerships globally, including U.S. banks like Customers Bank and MVB Bank, as well as European banks like LHV Bank and Gorenjska Banka that can process payments in USD as well. “We are also in conversations to onboard United Texas Bank, Western Alliance Bank, Axos Bank, and Cross River Bank to ensure we maintain a robust network in the midst of all of this change,” Zagotta added.

While Bitstamp is looking at stablecoins as a potential solution to crypto’s banking problem, it’s worth noting that some major stablecoins like USD Coin (USDC) aren’t immune to banking problems themselves. USDC issuer Circle faced major issues in March due to its $3.3 billion exposure to the collapsed Silicon Valley Bank (SVB). The events caused USDC to briefly lose its 1:1 peg with the U.S. dollar.

According to media reports, the banking crisis has been subsiding over the past few weeks but isn’t close to being over. According to José Manuel Campa, the head of the European Banking Authority, European banks have remained vulnerable following the demise of SVB and the subsequent emergency rescue of Credit Suisse by UBS.

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Michael Saylor’s MicroStrategy repays Silvergate loan and buys 6.5K BTC

MicroStrategy has increased its total Bitcoins holdings to 138,955 BTC, purchased for $4.1 billion at an average of $29,817 per coin.

MicroStrategy, a business intelligence firm and a major Bitcoin (BTC) investor, is acquiring more BTC amid the recent cryptocurrency market recovery.

MicroStrategy co-founder and former CEO Michael Saylor took to Twitter on March 27 to announce that the firm has repaid its $205 million loan to Silvergate.

Citing a form 8-K filing with the United States Securities and Exchange Commission, Saylor stressed that MicroStrategy repaid the Silvergate loan at a 22% discount.

The company has also acquired a significant stash of Bitcoin, purchasing 6,455 BTC for $150 million, or at an average price of $23,238 per coin as of March 23, the former CEO said. With the purchase, MicroStrategy has increased its total Bitcoins holdings to 138,955 BTC, bought for $4.1 billion at an average of $29,817 per coin, Saylor said.

This is a developing story, and further information will be added as it becomes available.

Does Ross Ulbricht’s pardon change the narrative of Bitcoin as a crime tool?

Kraken to suspend Plaid withdrawals and deposits via ACH Silvergate

Joined the Silvergate Exchange Network back in 2019, Kraken is now looking for new ACH funding options.

Major cryptocurrency exchange Kraken is experiencing difficulties with the withdrawal and deposit channel related to the automated clearing house (ACH) via Silvergate.

Kraken has reportedly notified its users that it will be unable to support ACH deposits and withdrawals starting from March 27. According to multiple online reports by alleged Kraken users, Kraken sent an email notice with the announcement on March 22.

In the statement, Kraken specified that users will no longer see a deposit option via Plaid or withdrawal option via ACH Silvergate beginning March 27. “No other services will be affected by this change, including ACH instant purchases via Online Banking,” the firm noted.

Kraken has advised users to take a look at the other available funding options in order to ensure uninterrupted funding experience, including MVB Bank for Fedwire deposits and withdrawals as well as other instant purchase options.

“Our team is working to make ACH funding available again as soon as possible,” Kraken stated.

Silvergate is one of the crypto-friendly U.S. banks that collapsed in early March alongside other lenders like Silicon Valley Bank. The events have posed major challenges for the cryptocurrency industry due to many crypto firms holding significant exposure to the banks.

Related: FDIC sells Signature Bank deposits to Flagstar, crypto not included

Kraken is one of the world’s largest cryptocurrency exchanges at the time of writing, trading more than $1 billion daily, according to data from CoinGecko. In 2019, Kraken joined the Silvergate Exchange Network, which allowed the firm to offer deposits and withdrawals in U.S. dollars from Silvergate accounts.

Kraken is not the only crypto exchange that was forced to halt its ACH deposits and withdrawals via Silvergate. On March 2, Winklevoss brothers-founded exchange Gemini also stopped accepting customer deposits and processing withdrawals through Silvergate ACH and wire transfers.

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Yellen defends government intervention to avoid another SVB

The Treasury Secretary of the U.S. Janet Yellen said the federal government will intervene if it is necessary to protect other small lenders.

Nearly two weeks after the collapse of three United States banks - Silicon Valley Bank (SVB), Silvergate and Signature- Treasury Secretary Janet Yellen said the federal government is ready to take action if needed. 

According to a Bloomberg report of excerpts from a speech Yellen will give on Tuesday at the American Bankers Association in Washington D.C., the Treasury Secretary said: 

“Our intervention was necessary to protect the broader US banking system, and similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

Yellen is set to defend recent measures taken by the government to defend the banks and the greater economic impact of the situation, calling the government actions “decisive and forceful actions.” 

Additionally she said the government intervention helped to maintain the "important role" of small and mid-size lenders in the U.S. economy. 

“The Treasury is committed to ensuring the ongoing health and competitiveness of our vibrant community and regional banking institutions.”

U.S. regulators began swiftly working on a plan following the banking crisis, during which Yellen initially said no bailout would be necessary. Instead insured and uninsured deposits were guaranteed at both SVB and Signature by the regulators. The U.S. Federal Reserve also launched a new way to help lenders cover withdrawals. 

A meeting has been announced by Congress which is scheduled for Mar. 29, which will delve into failures of SVB and Signature Bank

Related: Breaking: SVB Financial Group files for Chapter 11 bankruptcy

U.S. President Joe Biden said he is “firmly committed” to holding accountable whoever was responsible for the recent collapses. Biden also stated that shielding depositors involved with SBV and Signature will be at ‘“no cost to the taxpayer."

The Department of Justice and the Securities and Exchange Commission have both reportedly opened inquiries into the incident. Meanwhile, economists have analyzed that over 186 banks in the U.S. are well-positioned for collapse.

Does Ross Ulbricht’s pardon change the narrative of Bitcoin as a crime tool?