Today Bitcoin and ether shrug off last Week's losses binance reportedly Developed a plan to avoid prosecution by U.S authorities and Caitlyn long of Custodia Bank weighs in on all the Scrutiny surrounding crypto banking Including the uncertainty at silvergate [Music] Welcome to cnbc's crypto world I'm Mackenzie sigalos crypto prices are Mixed to start the week after taking a Beating over the weekend on the heels of Silvergate expressing doubts about the Viability of its business as of noon Eastern Bitcoin and ether both Rose About half a percent with Bitcoin Trading at around 22 500 and either Trading below the sixteen hundred dollar Level the Matic token however drops Slightly trading at around a dollar Fifteen Okay let's talk about the top stories First two days after silvergate raised Doubts about its liability the digital Asset focused Bank said it made a quote Risk-based decision to discontinue its Crypto payments Network the decision to Halt The silvergate Exchange network was Announced late on Friday with the Company writing on its website that it Was effective immediately and that all Other deposit related Services remain Operational now last Wednesday silver Gates closed in a filing its ability to
Operate was a going concern and said That it had sold additional debt at a Loss silvergate warned more losses mean The bank could be less than well Capitalized after that warning crypto Heavyweights including coinbase and Galaxy digital dropped silvergate as Their banking partner silvergate has Been struggling to stay afloat after the Collapse of FTX drove investors to pull Out eight billion dollars in deposits in The last three months of the year next Binance reportedly put together a plan To avoid the threat of prosecution by U.S authorities as it started its American entity in 2019 as according to The Wall Street Journal which cited Messages and documents from 2018 to 2020 Reviewed by the news Outlet alongside Interviews with former employees the Journal reports that binance execs Warned that any lawsuit from U.S Regulators would be like nuclear fallout For the firm's business and its officers The report also alleged that binance and Finance U.S are more intertwined than The companies have disclosed mixing Staff and finances and sharing an Affiliated entity that bought and sold Digital assets we reached out to binance And binance.us for comment and in a long Statement from binance a spokesperson Noted that currently binance.com does Not have any U.S customers and that
Binance.com and binance.us are separate Legal entities the spokesperson also Said that Finance already acknowledged That the company did not have adequate Compliance and controls in place during Its early years noting that while the Firm grew at such a rapid Pace it quote Made some initial missteps which have Now been rectified the spokesperson went On to say that Finance made a massive Investment in compliance over the past Two years and now has a team dedicated To it of more than 750 employees around The world the Wall Street Journal also Reported citing subpoenas and people Familiar with the situation that the doj And SCC have been investigating Binance's relationship to binance.us Since at least 2020. we reached out to Both agencies for confirmation the SEC Told us it does not comment on the Existence or non-existence of a possible Investigation the doj didn't get back to Us right away last up police and Singapore have started to investigate Terraform Labs the company behind the Failed Terra USD stablecoin that's According to a Bloomberg article Published today pointing to an emailed Statement from police which also noted That inquiries are ongoing and their Investigations related to terraform Labs Now as you know do Quan the company's Co-founder has been on the run for
Nearly a year he's wanted by authorities In South Korea authorities reportedly Told Bloomberg Kwan isn't currently in Singapore meanwhile in the U.S the SEC Just recently charged terraform labs and Quan with defrauding investors and Alleged crypto schemes Juan also faces Charges in South Korea All right for our main story let's turn Back to silvergate crypto worlds today On mckeels spoke with Caitlin Long who's The CEO of custodia Bank which aims to Bridge traditional finance and digital Assets they spoke about the turmoil at Silvergate bank and custodia's lawsuit Against the Kansas City fed as the Central bank scrutinizes this new type Of Institution Caitlin thank you so much for joining us So we've been covering the story with Silvergate the drop in its shares you Know the price movement or lack thereof Really with Bitcoin and ether and Following that story since about the Middle part of last week what has been Your biggest takeaway so far Uh well at crypto and banking uh is a Front burner issue for sure and all eyes Are on not just silvergate but the fdsc Inspector General last week came out and Noted that there were 11 different banks That as they said quote unquote may have Been involved in alleged wire transfer Fraud involving FTX and so there's a lot
Of focus on silvergate and signature but Looks like there there were many more Than just those two FTX really kind of Fueled uh the argument for more crypto Skeptical Regulators that are seeming Pretty eager to come down hard Especially with all of the enforcement Actions that we saw in the middle of February uh Tell me what that relationship between The two looks like from where you sit Both as someone that's been in this Industry for a really long time for many Years now um and also someone that's Running a a bank for crypto businesses Right we're not operating yet as a bank But your question is spot on uh the Bottom line is a huge swath of the Crypto industry deserves to burn on a Raging funeral pyre and the markets are Taking care of it uh and FTX was of Course part of that uh there are of Course legitimate lawful uses of this Technology and that is where custodia Intends to play unfortunately in Washington DC however what we're seeing Is the baby is being thrown out with a Bath water because you have a lot of Regulators who are embarrassed that they Missed major topics such as as the the Implosion of the crypto lenders the FTX Fraud itself where Sam Bank and freed Was donating a lot of what may have been Customer money to political campaigns
And trying to dominate the discussion uh In fact actually trying to set up a Self-regulatory organization where he Would have been in charge I'm so glad The industry dodged that bullet because He's not a believer in the real Technology of digital assets and then Also those of us who were warning Because it was fairly obvious that there Were there was a lot of bank run risk in The banks that were banking this Industry these deposits from this Industry can literally disappear in the Span of minutes and so if the banks were Investing in anything other than cash They were susceptible to the bank runs That have actually occurred What was silvergate to the crypto Industry but I mean still today I guess What I I mean for so long it was very Difficult for bank for crypto companies To get banking relationships um which Every company needs uh Banks like Silvergate and signatures seeing the Opportunity to do so early What did that mean for crypto businesses And Tell me about the dart Cloud that's kind Of hanging over the industry now with The potential of a silvergate bankruptcy On the horizon well the Dark Cloud is Well beyond just silvergate it is the Debanking as you pointed out you know I've been around a long time this is the
Third wave that we've seen it happens Every four years during the bear markets That the digital asset industry gets Debanked and in fact if you go back to The 2014 bear Market one of the things That caused coinbase to become the big Gorilla in the industry is that it Actually was able to retain durable Banking relationships it's sad that That's the that tends to become a Differentiating factor but it is and Entrepreneurs in this space have had to Learn that that's one of the biggest Existential risks to the startups in This space is is whether or not they Keep their banking relationships and Even the legitimate startups who are Engaging only in the lawful parts of the Industry where there's clients with Anti-money laundering laws and a real Real focus on anti-fraud uh those are Those startups are also being thrown out Uh the proverbial baby thrown out with The bath water we've seen this before The industry is of course going to be Fine but unfortunately there will be Arbitrary winners and losers picked by The government as a result of this The industry is going to be fine is that Just a function of time or are there Substitutions Well it's so interesting because the U.S Tends to be so U.S focused and in fact As you know there are no borders in this
Technology that's one of the wonderful Things about it and of course most of The increased adoption especially for Bitcoin isn't is coming in places where One might not have expected it in the U.S it is true that most of this Industry has in the last couple of years Been a speculative industry but there Are a lot of people in the world who do Not have bank accounts for whom this is Meaningful this technology same thing With regard to Emerging Markets where in Some countries you see for example What's happening in Nigeria as we speak An attempt by the government to get away From cash and roll out a digital Central Bank digital currency has actually Caused an Inc a spike in the in the use Of Bitcoin and that's because the the Average Nigerian on the street according To press reports has not been Comfortable with the government-issued Currency and now that cash is being Phased out uh they're looking for Something that they trust more and Turning to bitcoin we've seen that in a Number of Emerging Markets it's just That you know for folks in the developed World who've never had to live under Hyperinflation who have never had to Live with a distrust of their National Currency it's uh we we have trouble Imagining exactly just how meaningful That alternative can be to folks just
Trying to live their lives and and and Store the hard the earned fruits of Their labor in a a store of value that's Better than their government currency As we're talking about crypto companies Being Choked from Fiat on ramps what has your Experience with Regulators been like This year oh boy this year in 2023 it's Outright downright hostile um what Happened well what happened to custodia We were making lots of progress and then Suddenly in January we got blindsided And on January 27th Um you saw an all-out attack on custodia We were the tip of the spear on this Debanking wave on the same day at the Same time the White House the Federal Reserve Board of Governors the Kansas City Federal Reserve Attacked custodia and then the Senate Minority leader Senator Dick Durbin came Out over the top a couple of days later On the senate floor to attack us the Funny thing is I have no idea how the White House or Senator Durbin even knew Who we were we're not even an operating Bank yet so why were we incurring the Wrath of obviously a very powerful Government agencies there is a lot that Will come out about what happened to Custodia and the White House Interference with the Federal Reserve Application uh and uh just the the
Nature of the politicization of this I've spoken out very strongly against The politicization of this and uh we're We're still we've had a pivot of course That custodia uh but stay tuned because We're actually very close to launching Knock on wood Okay that's all for crypto world today But we'll be back again tomorrow so We'll see you then [Music]
