Due to bank closures, Circle received a temporary lockout of part of its $3.3 billion in reserves, which provided the USDC’s peg to the value of the dollar. While that money has already gone to BNY Mellon, the company’s official announcement over the weekend caused investors to panic and rush to sell USDC. As a result, the value of the token deviated from the US dollar for a while.

The situation has now stabilised, but the issue of transaction processing when the crypto industry interacts with other markets remains open. It turns out that cryptocurrency exchange Coinbase had previously tried to solve the problem, as its CEO Brian Armstrong announced on Twitter.

What’s going on with cryptocurrency banks?

According to Armstrong, Coinbase had previously taken steps towards becoming a “neobank” – a large company that could become a bridge between the crypto industry and traditional finance. According to Cointelegraph sources, Brian said this in response to a comment from Evertas Insurance’s head of security Ryan Lackey. Here’s the latter’s rejoinder.

After what happened to Silicon Valley Bank over the weekend, why not reformat Coinbase into some sort of major neobank with “asset transfers to community banks and treasuries” as a first-class option alongside cryptocurrencies?

It is worth noting that some cryptocurrency companies are even now thinking about launching their own banking solution. In particular, cryptocurrency exchange Kraken announced this the day before, with the launch of such a bank tentatively expected to take place soon.

Armstrong agreed that the industry now needs “alternative banking” – an area where large cryptocurrency companies could have a presence. Lackey also added that Coinbase already has a lot of credibility among investors, so it would be much easier for the exchange to pull something like this off.

Admittedly, this is all only at the discussion stage for now. Such a project would be difficult to implement, and you need approval from the U.S. regulators. Considering the pressure the regulators put on crypto in recent weeks, the idea of a neo-bank is likely to stay on paper.

In addition, the current collapse of banks could be aimed precisely against cryptocurrencies. Today, Blockstream spokesperson Warren Togami shared curious details from the manager of a small US bank. Here’s a relevant rejoinder from the correspondence.

Today almost every bank regulator is contacting every bank in existence and asking for liquidity reports and to clarify if they are going to apply for the new Fed programme. They also ask if they have any connection with cryptocurrencies. They are clearly trying to make sure that smaller banks will not engage with this area.

As we noted earlier, the big banks like JP Morgan and BNY Mellon are willing to engage with big crypto businesses, but they certainly will not engage with smaller companies. Accordingly, effectively restricting small banks would mean serious problems for small US crypto projects. There is a chance that they will not be able to get the banking access they need to conduct transactions. Well, that will mean either shutting down or moving to other more friendly jurisdictions.

Amid USDC’s parity problems, another major cryptocurrency exchange, Binance, is pursuing its own initiative – converting BUSD staplecoin from its industry recovery fund called the Industry Recovery Initiative. According to Binance chief executive Changpen Zhao, the tokens will be converted into “native cryptocurrencies” – specifically Bitcoin, Etherium and Binance Coin.

The total amount of conversion reaches up to a billion dollars. On his Twitter account, Zhao posted links to the relevant transactions to ensure transparency.

???? YOU CAN FIND MORE INTERESTING STUFF ON US AT YANDEX.ZEN!

The decision by Binance’s management has sparked mixed reactions from the cryptocurrency community. Some said it was an expected move in the current challenging environment. Others didn’t understand the motive – why did Binance decide to convert Stablecoins into more volatile cryptocurrencies?

What’s really at issue here is the BUSD staplecoin itself. Previously it was issued by Paxos, but after a decision by the US Securities and Exchange Commission (SEC), the issuance of BUSD was halted. Against this backdrop, Stablecoin has lost a significant portion of its capitalisation as users prefer to exit to other Stablecoins.


It looks like US cryptocurrency companies may indeed face a banking crisis in the foreseeable future, triggered by the unwillingness of financial institutions to engage with them. Obviously, there are few ways out of such a situation. Here we are left to either hope for the launch of a crypto-bank from Kraken, or think about moving to other countries.


What do you think about it? Share your opinion in our chat room of shorting lovers of your portfolio. There we discuss other important news from the world of decentralised finance.