Who is Cross River Bank, Circle’s new partner for USDC? | coindesk JAPAN | Coindesk Japan

Cross River Bank has been making headlines in the crypto industry following the collapse of crypto-friendly Silvergate Bank, Silicon Valley Bank and Signature Bank.

The bank is a venture-backed, FDIC-protected regional bank in New Jersey. It is both a financial institution and a fintech company.

circles and partnerships

With the bankruptcy, it was believed that Signature Bank’s real-time payment infrastructure “SigNet” had ceased operation (in fact, it was not), so Circle (Circle), a client that handles the stablecoin USDC (USDC), was closed for payments. was forced to find another way to Circle CEO Jeremy Allaire today announced a new partnership with Cross River Bank for automated payments.

The three bank failures come at a particularly volatile time for the crypto industry, which is suffering from a prolonged “crypto winter.” Last year, the cryptocurrency industry was hit by a number of scandals that made headlines, including the liquidity crisis and the collapse of major cryptocurrency exchange FTX. The string of bank failures is also likely to increase regulatory scrutiny of crypto-friendly banks. In particular, attention will be focused on the health of the balance sheet.

“Regulators, who tend to model the latest battle, are definitely on alert now to make sure banks, including Cross River, are well-capitalized,” said the University of Florida’s. Finance professor Jay Ritter said.

What is Cross River Bank?

Founded in 2008, Cross River Bank has grown to $9.9 billion in total assets and has so far made $100 billion in loans, according to its official website. above.

Unlike most fintech companies, the state-licensed bank has a regulated and compliant infrastructure for structuring loans, and a real-time payment system that allows the exchange of crypto assets for fiat currency at any time. It has

Many VCs have dealt with three failed banks, and Cross River’s ties to big VCs may make it a natural choice to move to.

Cross River raised $28 million in 2017, backed by leading VCs including Battery Ventures, Andreessen Horowitz and Ribbit Capital. bottom.

In 2018, a funding round of about $100 million was announced, of which $75 million was invested by KKR, a major US fund. Battery Ventures, Andreessen Horowitz and Ribit Capital also invested again.

But part of the bank run that has driven Silvergate, Silicon Valley, and Signature into bankruptcy is that their customers, traditional tech companies, have become high-risk assets under high interest rates.

Cross River also has deep ties to the tech industry, providing financial infrastructure to the likes of Coinbase and Stripe, and lending to fintechs like Affirm, a postpaid payment service (BNPL).

The story so far

The collapse of Silvergate Bank, which was reportedly unable to file earnings reports due to concerns of auditors and accounting firms, has been a popular Silicon Valley bank in the cryptocurrency and general tech industries. bankruptcy was sudden.

And the Silicon Valley bank run was one of the causes of the Signature run, which also went bankrupt a few days later.

“Silicon Valley Banks have had problems with the duration gap between assets and liabilities. They invested heavily in longer-maturity government bonds and mortgage-backed securities, and prices[of those bonds]fell when interest rates rose. But bank accounts don’t represent current market prices, and they were able to keep much of it on their balance sheets at their previous cost,” Ritter said.

“But it’s not that regulators can’t pay attention to current market prices and see how much capital they’d lose if they were to mark-to-market. That’s where regulators will be looking to make sure they don’t run into the same problem as the Silicon Valley bank that gambled and lost.”

Regulatory oversight

Cross River isn’t the only company crypto firms are considering trading with. Circle transferred USDC reserve assets to Bank of New York Mellon (BNY Mellon).

Boris Revsin, Managing Partner of Tribe Capital, named Arizona-based Western Alliance Bank ( Western Alliance Bank).

Any bank that fills the void of the three failed banks, however, will be subject to more vigilant scrutiny.

“Everyone has seen cryptocurrencies as relatively risky due to the high number of frauds and thefts,” Professor Ritter said. Regulators will look at banks in terms of how sensitive they are to interest rates and how much they are involved with crypto assets, making it much harder for banks to keep secrets than it was a week ago. I think,” he continued.

CoinDesk reached out to Cross River Bank for comment, but did not receive a response as of this writing.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Wikimedia
｜Original: What Is Cross River Bank, USDC Stablecoin Issuer Circle’s New Partner?