After the failure of the two crypto-friendly banks Silvergate Capital and Signature, the crypto industry is looking for a new partner. She could now have found it in the Customers Bank – even if the financial house doesn’t seem that enthusiastic about it.
• Crypto and banking crisis makes crypto companies look for alternatives
• Customers Bank convinces with CBIT platform
• Customers Bank does not want to make crypto ambitions a big deal
A few months have already passed since the crisis in the crypto sector, with the failure of various crypto lending services and the crypto exchange FTX, also spread to various US regional banks and plunged them into ruin. The regional banks that have since closed also included the two crypto-friendly financial houses Silvergate Capital and Signature Bank.
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However, even though these banks have failed and US regulators are increasingly scrutinizing the entire crypto sector, the need for lending institutions that work with crypto companies has not diminished. And so numerous crypto giants such as Coinbase, Circle, BitGo or Paxos finally ended up with a new partner who fills the vacuum left by Silvergate and Signature. We are talking about the Customers Bank, which now counts numerous market makers, stablecoin issuers and crypto exchanges among its customers.
CBIT platform attracts crypto customers
Of course, the bank has not missed the sharper tone that US authorities are now adopting towards crypto-friendly banks. This is probably the reason why the US regional bank no longer advertises its online platform CBIT (Customers Bank Instant Token), which is aimed at crypto customers, on its own website. This service enables crypto customers to move US dollars like crypto currencies in real time 24 hours a day, seven days a week – a service that Signature Bank and Silvergate previously also offered and which should make a significant contribution to the popularity of Customers Bank in the crypto sector.
Just two years ago, and thus before the crypto and regional bank crisis, the Customers Bank had campaigned for the crypto sector and underlined its ambitions in this young market segment. However, as Customers CEO Sam Sidhu tells Bloomberg, the bank is now “focused on the industries that allow us to have stronger and deeper customer relationships”. In the balance sheet for the first quarter of 2023, there was no longer any talk of crypto ventures at Customers Bank.
The financial house has also become cautious with its CBIT platform. Deposits with the service are limited to 15 percent of the bank’s total deposits. At the end of the first quarter, CBIT deposits accounted for approximately 13 percent of the $17.7 billion in total deposits. Even if there is still some room up to the 15 percent, this was already USD 1.85 billion more than in mid-November 2022, when the FTX bankruptcy shook the crypto sector.
Network effects contribute to the popularity of the Customers Bank
Even though Sidhu emphatically explains to Bloomberg that the growth in customer deposits is not primarily coming from the crypto sector, but from the venture, tech and fund financing sectors, it cannot be denied that large crypto customers such as the stablecoin specialist Circle, in turn, are making the customer platform more attractive to other customers through network effects. For example, Circle uses the CBIT platform to process the US dollars that come with the creation and redemption of the USD Coin stablecoin.
Nevertheless, it is also important for Customers Bank to counteract the higher risks associated with crypto deposits in other ways. For this reason, the financial house also holds the CBIT deposits in US dollars and does not invest them in fixed income securities or loans in order to be able to react quickly to any outflows, writes Bloomberg. In addition, customers distribute large deposits to different banks, a practice that has proven its worth among financial houses after the turmoil surrounding the regional bank crisis.
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