Metropolitan Holding Corp will shutter its crypto vertical as banks’ crypto business lines face increasing scrutiny.
The New York-based bank anticipates ending its relationships with institutional crypto clients in 2023. The move will cost it 1.5% of its revenues and 6% of its deposits.
Metropolitan to Complete Winding Down of Crypto Business in 2023
According to a press release, Metropolitan provided clients with “debit card payment and account services,” and has no outstanding loans to its clients. It added that the bank’s other customers can still do business with crypto firms.
Metropolitan CEO Mark DeFazio said that the institution started winding down its crypto activities in 2017.
“Today’s announcement of our exit from the cryptocurrency-related asset vertical represents the culmination of a process that began in 2017, when we decided to pivot away from crypto and not grow the business,” he said.
Bankrupt crypto broker Voyager reportedly held $1.3 billion in crypto assets and $300 million in cash with Metropolitan. Voyager Digital filed for bankruptcy in July 2022 after hedge fund Three Arrows Capital defaulted on a $650 million loan.
In Sep. 2022, digital asset businesses reduced their Metropolitan deposits by 50%.
Silvergate Bank Run Puts Pressure on Other Banks
Scrutiny on banks with crypto business lines has increased after the collapse of FTX. Several major banks, including Silvergate, Provident Bancorp, and Signature Bank, have nontrivial crypto ties that could see them come under greater pressure after Silvergate customers withdrew $8 billion last week.
The increase in withdrawals has seen Silvergate’s business valuation shrink from $11.9 billion to $3.8 billion between Sep. 30, 2022, and Dec. 31, 2022. Its share price has also fallen over 90% since the start of 2022.
According to Sultan Meghji of the Federal Deposit Insurance Corporation (FDIC), banks with crypto services could soon face greater scrutiny.
“Whether or not it’s been announced publicly, I think there’s a serious push to get crypto completely separated from the U.S. banking system,” he told Bloomberg. A recent report by the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency said that crypto risks that can’t be mitigated ought not to be allowed into the U.S. banking system.
Silvergate started as a traditional bank but focused on crypto in 2013. Silvergate Capital went public in 2019, raising $40 million from its initial public offering, listing Coinbase, Circle, and BUSD issuer Paxos in its investor prospectus.
Signature Bank, which reportedly once held $23.5 billion in crypto assets, announced that it would be offloading between $8 billion and $10 billion in crypto assets in Dec. 2022. Signature Bank’s share price fell 64% in 2022.
Crypto bank Juno recently advised customers to withdraw assets into a self-custodial wallet or exchange them for cash after suspecting problems with payment partner Wyre. Wyre recently announced that customers could only draw 90% of their balances because of the state of its business.
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