Statement to maintain cooperation in banking business
US cryptocurrency exchange Gemini has denied reports that it will end its banking partnership with JPMorgan Chase. The two companies are maintaining their relationship. JP Morgan has not yet commented.
Despite reporting to the contrary, Gemini’s banking relationship remains intact with JPMorgan.
—Gemini (@Gemini) March 8, 2023
The statement follows a report by Reuters. Reuters reported that JP Morgan was severing ties with Gemini, citing sources familiar with the matter. The background is mainly based on the following points.
- Deteriorating financial condition of Silvergate Capital, which also functions as a lender to the cryptocurrency industry
- Analysis suggests cryptocurrency firms have fewer options for finding banking partners in the US
- Regulators warn banks to be cautious when dealing with the crypto industry
Silvergate Capital, the holding company of Silvergate Bank, told the SEC on Monday it may not be well capitalized and is reviewing its business. Following this report, major U.S. cryptocurrency exchange Coinbase and stablecoin issuer Paxos announced that they would suspend transactions with Silvergate Bank.
Silvergate Capital announced on the 8th that it plans to liquidate its banking business and downsize its business. He explained that he judged this policy to be the best in light of industry and regulatory trends.
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U.S. Regulatory Alert
U.S. regulators are issuing statements cautioning against the risks that the crypto sector poses to banks, in the context of the FTX bankruptcy and other factors.
In January, the U.S. Federal Reserve (FRB), U.S. Office of the Comptroller of the Currency (OCC), and the U.S. Federal Deposit Insurance Corp. It is highly likely to conflict with the banking business,” he said.
Risks such as “risk of fraud and fraud by industry participants”, “legal uncertainty regarding custody operations, token redemption and ownership rights” and “magnitude of market volatility (price fluctuations)” are listed. will continue to monitor its cryptocurrency-related exposures.
connectionUS Fed and others warn of risks cryptocurrencies pose to banks
What is custody
A term widely used for assets other than virtual currency. It refers to a service that performs a wide range of operations, such as asset custody, settlement related to trading, receipt of principal and interest, dividends, and exercise of voting rights. A company that performs custody is called a custodian.
Also in February, the Fed, OCC, and FDIC issued a statement regarding the risks that deposits in the cryptocurrency industry pose to banks, while noting that they “do not prohibit or discourage certain types of companies from providing banking services.” alerted.
Banks are encouraged to exercise sufficient risk management when entrusting funds for the cryptocurrency industry.
connection: U.S. Federal Reserve and others warn banks that handle funds in the virtual currency industry
Fed Chairman Jerome Powell also said on the 7th of this month that he would like to avoid stifling innovation, but that financial institutions should be very careful when engaging with the cryptocurrency sector.
connection: Powell Fed Chairman “Banks should pay close attention to their involvement with virtual currencies”
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