Tether Holdings Ltd., an offshore stablecoin provider, found a way to access the US financial system through Signature Bank, according to sources familiar with the matter. The arrangement involved Tether directing crypto clients to pay for stablecoins by sending dollars to its Bahamas-based banking partner, Capital Union Bank Ltd., via Signature’s Signet payments platform. This setup was in place when Signature Bank was seized by regulators last month.
US Banking System Hesitant to Embrace Crypto Firms
The reluctance of mainstream US banks to work with crypto firms has led to these companies seeking alternatives with smaller, more willing lenders. This issue has become more pronounced after the collapse of Signature Bank and Silvergate Capital Corp. in March. Despite never being sanctioned, Tether still faced challenges in accessing the US banking system due to regulatory expectations that banks must know who is using their services.
Signature Bank’s Risk Appetite
If Signature Bank was aware of the arrangement with Tether, it could suggest a high risk appetite, according to Alma Angotti, a former senior enforcement official at the SEC and Treasury Department. Banks like Tether often access several banking channels and counterparties to manage risk. Tether, in a statement, mentioned that its risk management practices enabled the company to identify risks and weaknesses that others might have missed, ensuring their entities would not be affected by direct or indirect exposure to Signature Bank.
Regulatory Implications and Future Developments
As the crypto industry continues to evolve, the relationship between Tether and Signature Bank raises questions about the effectiveness of current regulatory frameworks in addressing potential risks associated with high-risk financial arrangements. Authorities may need to reevaluate their approach to overseeing and regulating the interactions between traditional banks and crypto firms, striking a balance between fostering innovation and ensuring financial stability.
Crypto Firms Seek New Banking Solutions
In light of the challenges in accessing traditional banking services, crypto firms are increasingly exploring alternative solutions, such as decentralized finance (DeFi) platforms and digital banking services tailored to the specific needs of the industry. As crypto firms continue to search for new ways to operate within the US financial system, it is crucial for regulators to keep pace with these developments, ensuring a fair and secure financial ecosystem for all participants.
Tether’s Success Amid US Crypto Clampdown
Despite the ongoing regulatory pressure on the crypto industry in the US, Tether has experienced significant growth in 2023, with the total value of its stablecoins in circulation increasing by about 20% to nearly $80 billion. Tether’s success, along with the struggles faced by its competitors like Circle’s USD Coin, demonstrates the potential for offshore stablecoin providers to thrive in an environment of increased scrutiny and regulatory challenges.
#tether doesn't have any exposure to Signature Bank.— Paolo Ardoino 🍐 (@paoloardoino) March 12, 2023
If you are able, we kindly ask for your support of Logll Tech News today. We appreciate it.
Editor, Logll Tech News
⭐️⭐️⭐️⭐️⭐️ 2023 Laptops
Acer 2023 Newest Aspire 5 15.6" FHD IPS Slim Laptop, Intel Core i3-1115G4(Up to 4.1GHz), 20GB RAM, 1TB NVMe SSD, WiFi 6, USB, RJ-45, Webcam, Amazon Alexa, Windows 11 S, w/GM Accessories
Lenovo 2023 Newest Ideapad 14 Inch Student Laptop, Intel Pentium Silver N5030 4-Core, up to 3.1 GHz, 4GB RAM, 256GB Storage, 1 Year Office 365, WIFI6, Webcam, Bluetooth, Windows 11
ASUS ROG Strix G16 (2023) Gaming Laptop, 16” 16:10 FHD 165Hz, GeForce RTX 4070, Intel Core i9-13980HX, 16GB DDR5, 1TB PCIe SSD, Wi-Fi 6E, Windows 11, G614JI-AS94, Eclipse Gray
Best Offer Today
The Tether and Signature Bank connection highlights the persistent challenges that crypto firms face in gaining access to the US financial system. With mainstream banks remaining reluctant to embrace the volatile crypto industry, these firms are forced to explore alternatives with smaller, more receptive lenders. As the US continues to tighten regulations on the crypto sector, offshore stablecoin providers like Tether may benefit from increased demand for their services. However, the relationship between Tether and Signature Bank also raises questions about risk appetite and regulatory oversight in the banking industry. It remains to be seen how regulators and financial institutions will adapt to the ever-evolving landscape of cryptocurrency and its implications for the global financial system.
Join Our Newsletter
Frequently Asked Questions
1. How did Tether access US banks?
Tether accessed US banks through Signature Bank's Signet payments platform by instructing clients to send payments to its Bahamas-based banking partner, Capital Union Bank Ltd.
2. What role did Signature Bank play?
Signature Bank played a key role by providing its Signet payments platform, which allowed Tether's clients to send fiat dollars for stablecoin transactions.
3. Are US banks reluctant to support crypto?
Yes, US banks are generally reluctant to support crypto firms due to concerns over volatility, regulatory scrutiny, and the potential for money laundering and other illicit activities.
4. What challenges do crypto firms face?
Crypto firms face challenges such as limited access to the US financial system, regulatory hurdles, and a general reluctance from mainstream banks to work with them.
5. How does regulation impact stablecoin providers?
Regulation impacts stablecoin providers by dictating the level of transparency and compliance required, potentially affecting their ability to operate and limiting access to the financial system.