BCB Group Freezes US Dollar Payments: Another Crypto Firm Hit by Signature Bank’s Fall

Just when the cryptocurrency world thought it might catch a breather after the Silvergate saga, another blow lands. London-based crypto payment provider BCB Group has pressed pause on its US dollar payment pilot program. Why? The sudden closure of Signature Bank by regulators sent shockwaves, directly impacting BCB’s operations. Let’s dive into what this means for crypto businesses and the broader implications for the industry.

What Happened? Signature Bank’s Closure and BCB Group’s Response

For those unfamiliar, BCB Group is a key player in the crypto space, offering payment services and business accounts specifically tailored for cryptocurrency companies. Think of them as a bridge between the traditional financial world and the often-complex world of crypto. Following the earlier troubles at Silvergate Bank and the Silvergate Exchange Network (SEN), BCB Group saw an opportunity. CEO Oliver von Landsberg-Sadie announced plans to introduce US dollar payment solutions to fill the gap left by Silvergate. They even had a pilot program ready to go, with six clients eager to test it out.

Things were looking promising. BCB Group successfully processed their first instant US dollar transaction on March 10th. However, there was a critical dependency: Signature Bank.

“We used Signature Bank for trade settlement and for U.S. dollar payment accounts,” explained von Landsberg-Sadie. With Signature Bank seized by regulators on March 12th, BCB Group’s US dollar payment pilot program was immediately put on hold.

Here’s a quick rundown of the key events:

• Early March: Silvergate Bank’s Silvergate Exchange Network (SEN), a vital platform for crypto transactions, is shut down.
• BCB Group Steps In: BCB Group announces plans to launch US dollar payment tools to address the gap left by Silvergate.
• Pilot Program Ready: BCB Group prepares a pilot program, relying on Signature Bank for US dollar transactions.
• March 10th: First successful instant USD transaction by BCB Group.
• March 12th: Signature Bank is closed by regulators.
• BCB Group Suspends Pilot: BCB Group is forced to halt its US dollar payment pilot program.

Why Signature Bank? And Why Does This Matter?

Signature Bank was known for being crypto-friendly. It provided essential banking services to many cryptocurrency businesses, facilitating the movement of US dollars in and out of the crypto ecosystem. For companies like BCB Group, this access is crucial for offering seamless payment solutions.

The closure of Signature Bank, along with Silvergate, highlights a growing challenge for the crypto industry: access to reliable banking partners. These banks were not just any banks; they understood the nuances of the crypto industry and were willing to work with crypto businesses when many traditional banks remained hesitant.

Von Landsberg-Sadie emphasized the impact, stating that services relying on Signature Bank for “trade settlement and for U.S. dollar payment accounts” are now suspended. However, it’s important to note that BCB Group’s payment services in other currencies remain unaffected. This is specifically a US dollar payment issue.

Silver Linings and Future Plans: BCB Group’s Next Steps

Despite the setback, BCB Group remains optimistic. Von Landsberg-Sadie expressed hope that they can quickly establish new US banking relationships. “It’s unfortunate to see [Signature Bank] go, but we’re hopeful that by establishing three new U.S. bank ties soon, we can continue to serve our clients. The only thing left to do is speed those up…” he stated.

He anticipates these new partnerships could be in place within 4 to 12 weeks. But what will BCB Group be looking for in these new banking partners? According to von Landsberg-Sadie, key criteria include:

• Strong Capital Structure: Banks that are financially robust and stable.
• Interest Rate Volatility Hedging: Banks that are well-protected against fluctuations in interest rates.
• Rigorous AML Controls: Robust Anti-Money Laundering (AML) measures to prevent issues like the FTX/Alameda situation, where entity conflation became a major concern.

While he didn’t disclose the names of potential partners, the focus on these criteria suggests BCB Group is prioritizing stability and regulatory compliance in its future banking relationships.

The Broader Banking Turmoil: A Weekend of Regulatory Intervention

The closure of Signature Bank didn’t happen in isolation. It was part of a tumultuous weekend in the US banking sector. Regulators also stepped in to shut down Silicon Valley Bank (SVB).

Here’s a simplified timeline of the weekend’s events:

The Federal Deposit Insurance Corporation (FDIC) was appointed as receiver for both SVB and Signature Bank. A key message from regulators was the assurance that all depositors in both institutions would be made whole. Importantly, they emphasized that taxpayers would not bear the cost, differentiating it from previous bank bailouts.

Von Landsberg-Sadie confirmed that some BCB Group clients had deposits at Signature Bank but expressed “reasonable hope” for swift payouts, possibly as soon as the next day, due to the regulator’s assurances.

Echoes of Silvergate: BLINC and the Need for Crypto-Friendly Infrastructure

Interestingly, BCB Group’s own BLINC network, a “cryptocurrency-focused quick settlement network,” is described as a European version of the Silvergate Exchange Network (SEN). This highlights the industry’s recognition of the value that Silvergate provided and the ongoing need for similar infrastructure. The failure of Silvergate, followed by the Signature Bank situation, underscores the fragility of the crypto banking ecosystem and the urgent need for resilient alternatives.

BCB Group had previously raised $60 million in a Series A funding round in January 2022, signaling strong investor confidence. They were also reportedly seeking further funding in February, indicating continued growth ambitions.

What Does This Mean for the Crypto Industry?

The suspension of BCB Group’s US dollar payments pilot is a symptom of a larger issue: the ongoing challenges faced by crypto companies in accessing traditional banking services. While regulators have stepped in to protect depositors in the recent bank closures, the long-term implications for crypto banking remain uncertain.

Here are some key takeaways:

• Banking Access is Critical: Reliable banking partnerships are essential for the smooth operation of crypto businesses, especially for payment processors.
• Regulatory Scrutiny: Increased regulatory attention on crypto and crypto-friendly banks is likely to continue.
• Need for Diversification: Crypto firms may need to diversify their banking relationships to mitigate risks associated with relying on a single institution.
• Innovation in Crypto Banking: The situation could spur innovation in the crypto banking sector, leading to the development of more robust and resilient financial infrastructure.

Looking Ahead

The crypto industry is navigating a period of significant uncertainty in the banking landscape. While the immediate impact of Signature Bank’s closure on BCB Group’s US dollar payments is clear, the long-term effects are still unfolding. BCB Group’s proactive search for new banking partners and their emphasis on stability and compliance are positive signs. The industry will be watching closely to see how quickly BCB Group and others can adapt and rebuild in this evolving environment. The need for reliable, crypto-friendly banking solutions remains as critical as ever for the continued growth and maturity of the cryptocurrency ecosystem.