The recent closures of Signature, Silvergate, and Silicon Valley Bank stopped some of the momentum in the crypto industry because several projects used those banks – but it was only temporary. For all of its flaws, an excellent aspect of capitalism is when one option fails, there is always another way to get something done. There is always someone willing to take risks that others won’t. This is currently happening with $USDC issuer Circle and a relatively unknown Cross River Bank.
As you remember, $USDC lost its peg a few weeks ago because it had $3.3B deposited in SVB. But since then, $USDC has regained its peg and now Circle is looking for new banks to deposit its reserve assets with. Then, on March 12th, Circle Co-Founder and CEO Jeremy Allaire announced that “Circle’s USDC operations will open for business on Monday morning, including with new automated settlement via our new partnership with Cross River Bank.”
Circle’s USDC operations will open for business on Monday morning, including with new automated settlement via our new partnership with Cross River Bank. https://t.co/ybkSEedzrC
— Jeremy Allaire (@jerallaire) March 13, 2023
The automated settlement part of Jeremy’s statement is a big deal. Most traditional banks don’t have 24/7 digital payment settlement systems that crypto projects need to operate. Details are limited, but it looks like Cross River uses a system called Real-Time payment system which is hopefully just as good or better than the other systems. Again, another positive aspect of capitalism is that multiple products exist that perform the same or similar functions. If you shut one down, there are five other options. With that being said, who is Cross River Bank and what kind of organizations do they deal with?
Cross River Bank
Cross River has come a long way since its founding in Fort Lee, New Jersey 12 years ago. The state-chartered bank now boasts $9.9 billion in total assets and has made over $100 billion worth of loans. But this is only part of what sets them apart from other traditional FinTech firms; their sophisticated compliance infrastructure enables instant crypto-to-fiat conversions anytime you need it with features like Real Time Payment system technology that also helps with payroll and insurance payout solutions.
Cross River is well-positioned with its strategic ties to some of the top venture capitalists. In 2017, an impressive $28 million funding round was secured from investors such as Battery Ventures, Andreessen Horowitz, and Ribbit Capital. That success continued into 2018 when a whopping additional $100 million investment was received – spearheaded by KKR alongside follow-on investments from existing backers.
Though originally seemingly stable, the traditional tech companies that banked with Silvergate, Signature, and Silicon Valley Bank became increasingly risky assets due to the governments’ reckless spending that led to a high-interest rate climate which ultimately resulted in forced closures for these banks. Cross River Bank also faced deep exposure due to its connections with Coinbase, Stripe, and Affirm; providing financial infrastructure services as well as loan origination options.
It’s obviously a turbulent time for the crypto industry due to multiple fraudsters throughout the industry and a concerted effort by the U.S. government to shut crypto down; an onslaught some are deeming Operation Chokepoint 2.0. However, crypto as a whole isn’t going anywhere. There might be some casualties along the way, but the builders in crypto are young, energetic, and rich. That’s a bad combo for the government to go against. Yes, there might be a limited number of on and off-ramps at the moment, but in time more will be created. $USDC and Circle had a setback, but it might be a blessing in disguise that forces them to seek out bigger and better partners in the future.
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