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Crypto.com Struggles to Maintain Fiat On-Ramps in the Face of Crypto Banking Crisis

source-logo  coindesk.com  + 2 more 09 March 2023 10:29, UTC

The digital assets industry is in the middle of a banking crisis with the collapse of crypto-friendly Silvergate Bank, and Crypto.com hasn’t been spared.

The Singapore-headquartered exchange is only now able to provide Euro-denominated banking services to users in the European Economic Area (EEA), having previously lost the ability to accept USD deposits because of issues with its banking partners.

For any crypto exchange, maintaining adequate fiat off-ramps is key to ensuring liquidity and impacts the ability for digital asset prices to rise. Market analysts attributed a 10% correction in bitcoin prices in January to Binance halting USD transfers.

An exchange that only has the ability to service users in one part of the world, and then in Euros, a far less liquid currency for crypto (most crypto trading pairs are denominated in USD), is going to have questions raised about its liquidity.

“Our EUR fiat wallet service provider recently reduced access to EEA residents via the single euro [payments area (SEPA) system],” a spokesperson for Crypto.com told CoinDesk.

“As SEPA’s intended purpose is to facilitate local borderless transfers between network participants within EEA, the EUR deposits/withdrawals via this service provider are not available to those not residing in the EEA,” the spokesperson added.

Finding a reliable partner is challenging

All this comes as Crypto.com has faced turbulence due to its relationship with two banks and wider fallout in the crypto industry.

Crypto.com’s prior banking partner was Transactive Systems, which held licenses in the U.K. and Lithuania. The Lithuanian Central Bank, which also has the role of market supervisor for the country, ordered the company to cease dealing with virtual currencies in January because of “serious infringements” of anti-money laundering laws.

Bloomberg reported that Transactive is the off-spring of PacNet, a Vancouver-based payments processor that was accused by the U.S. Department of Justice – which called it a “transnational criminal organization” – of processing payments for mail-fraud schemes.

Four executives of the company have been charged in the U.S. with mail fraud and money laundering. Provincial authorities in British Columbia, home to the company, are attempting to seize over C$17 million ($12.31 million) in property belonging to executives via a civil forfeiture lawsuit.

Crypto.com lost the ability to receive USD fiat deposits when its U.S-based banking partner, Metropolitan Commercial Bank, exited the crypto industry in January following a review by its Board of Directors.

The exchange still offers the ability for users to buy crypto via credit card, and in September, started to waive fees for new users for the first week.

A spokesperson for Crypto.com declined to name the exchanges specific banking partners only saying it works with a “variety.” They said that a migration to a new payment provider was completed on January 25.

On-chain data shows healthy deposits

Data from blockchain analytics platform Nansen shows that Crypto.com currency has an exchange balance of $3.6 billion and a stablecoin balance of $776 million. It has also seen a positive net flow of $248.8 million during the last week.

Currently, there are 297 active addresses for CRO, Crypto.com’s exchange token, a proxy for the number of engaged power user traders on the platform (exchange token holders get fee discounts on trades).

This number is down from around 1100 in mid-January, during the mini bull market, and 10,000, when the exchange bought sponsorship rights for the National Basketball Association’s Los Angeles Lakers arena.

CRO is down 16% over the last 30 days, and 82% on-year.


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