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- New York Metropolitan Commercial Bank is to stop crypto operations.
- The recent closure of crypto-banks has created a crisis in the crypto industry.
Since the consecutive collapse of crypto-friendly banks in March 2023, the crypto industry has needed a strong banking partner in the United States. Further increasing the hardships for the industry, Metropolitan Commercial Bank closed its operations due to the current market scenario.
MCBank Closing Crypto Operations
According to Metropolitan Commercial Bank’s (MCBank) April 18, 2023, SEC filling, crypto deposits were around $278.5 Million. On March 31, 2023, excluding the crypto clients, the bank’s total deposits were around $4.9 Billion. Its parent company Metropolitian Bank Holding announced in January 2023 about exiting crypto operations.
This decision closely follows the arrest of FTX’s former boss, Sam Bankman-Fried, who is facing trials for several financial crimes. The collapse of one of the leading crypto exchanges in the world was a black swan event in the crypto industry. It started a contagion effect that affected almost everyone directly or indirectly with FTX.
MCBank served four crypto clients, contributing to 1.5% of its total revenue, around $1 Million. 6% of the bank’s total deposits came from them, around $342 Million. These details were released in their Q3 2022 filing.
The Crypto Banking Scenario of the United States
On March 8, 2023, Silvergate Bank voluntarily closed with assets of around $12 Billion. Silicon Valley Bank went under the ownership of the Federal Deposit Insurance Corporation on March 10, 2023, with crypto assets of about $200 Billion. At the same time, Signature Bank was foreclosed by regulators on March 12, 2023, with around $100 Billion in assets.
This unforeseen chain of events cautioned U.S. banks from engaging in crypto. However, BYN Melon is still serving crypto clients, taking a slow approach. Provident Bancorp blamed the harsh crypto winter of 2022 as the root cause of the current banking crisis.
On April 18, 2023, co-CEO Joe Reilly and Carol Houle wrote a letter to the shareholders about the closure of crypto-friendly banks and how they shook the banking industry to its core. They argued that the situation was riding on the crypto downturn and affected multiple businesses, including those supported by Provident through their digital lending initiatives.
The current scenario has made many crypto entities operating in America move offshore. This decision also concerns the ambiguous regulatory scenario in the country. Moreover, the continuous closure of these crypto-friendly banks created a banking crisis that many related to the Lehman Brothers Crisis of 2008. This was said to be a significant event that started the global recession.
The crypto industry can only function optimally with a good banking partner. This partnership helps the exchanges accept fiat deposits in return for their services or tokens. They would need banks to pay their employees and vendors etc. The main concept behind crypto was building a parallel financial system free from intermediaries, but paradoxically they are dependent on Banks.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
