The US crypto industry has found a new banking partner in Pennsylvania-based Customers Bank. This small bank has become a favorite among hundreds of crypto companies, attracting new clients after the closure of crypto-friendly banks Silvergate Capital and Signature Bank earlier this year, according to Bloomberg.
The Last Man Standing
Customers Bank has gained a competitive edge in the crypto industry with its platform called Customers Bank Instant Token (CBIT). Similar to Silvergate Capital’s popular Silvergate Exchange Network (SEN) payments platform, CBIT enables 24/7 payments for its crypto clients.
Analysts believe that the closures of Signature and Silvergate have left Customers Bank as the last viable option for crypto companies. “With Signature and Silvergate basically shutting their doors, these balances had to go somewhere,” explains Frank Schiraldi from Piper Sandler.
“Customers Bank really seems to be the last man standing,” Schiraldi adds.
Sources familiar with the matter reveal that Employees at Customers Bank worked diligently to onboard new clients amidst the exodus from Silvergate and Signature Bank. However, despite its popularity in the industry, Customers Bank is hesitant to position itself as the number one banking partner for the crypto industry.
A Strategic Approach
Customers Bank takes a strategic approach by limiting deposits on its CBIT platform to no more than 15% of the bank’s total balance sheet. According to Bloomberg, CBIT deposits reached around $2.25 billion by the end of Q1 2023, accounting for approximately 13% of the bank’s total deposits.
While Customers Bank has seen a surge in partnerships with new crypto firms, the bank has recently removed a page on its website that promoted its crypto business. Additionally, management has refrained from touting crypto partnerships in its earnings calls.
“Bank representatives have indicated that only a small portion of the wave of new deposits were from new CBIT clients,” reveals the bank’s CEO, Sam Sidhu.
Instead, the bank focuses on other sectors such as finance, technology, and venture capital as the major drivers of deposits in the last three months. This strategic move may be attributed to the current regulatory environment surrounding the crypto industry in the United States.
Risk and Regulatory Concerns
The US Securities and Exchange Commission (SEC) is targeting major players in the crypto industry, including Coinbase and Binance, for operating as unlicensed securities exchanges, among other allegations. Furthermore, banking industry regulators have warned US banks about the risks associated with conducting business with the crypto sector.
“Banking regulators will be assessing how well Customers Bank is managing the risk and whether they possess the necessary understanding and control to mitigate the risks associated with crypto businesses,” says Alma Angotti, former SEC/Treasury Department enforcer and partner at consulting company Guidehouse.
