Customers Bank Reportedly Debanks Crypto Hedge Funds Amid FDIC Alert

Customers Bank, which services major cryptocurrency firms, including Galaxy Digital, Coinbase, and Circle, has started cutting off some hedge fund clients. Citing people familiar with the matter, the Pennsylvania-based bank has reportedly decided to ‘unload’ several funds, though the amount is undisclosed. One of the informants argued that this move affected only inactive accounts and was not as radical as debanking within the sector.

Customers Bank Tightens Crypto Hedge Fund Services

This came after the collapse of Silvergate Bank and Signature Bank in the previous year, which highlighted the problems the crypto firms encountered in getting banking services in the United States. Customers Bank, a subsidiary of Customers Bancorp, only deals with US dollars and does not support cryptocurrencies or crypto lending products. Rather, it provides Customer Bank Instant Token (CBIT)—a blockchain-based payment system enabling round-the-clock USD transactions involving over a hundred digital asset companies.

A representative from Customers Bank noted that the bank is quite selective in its client selection, which is part of its risk management plan. ”We have previously disclosed publicly our 15% exposure limit in the CBIT vertical. Because of this policy, we are very demanding in terms of new business and conduct a lot of analysis on each industry that we cater to,” the spokesperson explained.

FDIC Highlights Insolvency Risks in Banks

This banking shift occurs against a backdrop of broader financial instability. Recently, the Federal Deposit Insurance Corporation (FDIC) flagged potential insolvency risks within the U.S. banking system, noting $517 billion in unrealized losses and identifying 63 banks at risk. These concerns are compounded by disappointing manufacturing data, with the ISM Manufacturing PMI indicating a more significant contraction than expected.

This recent loosening of the U.S. Federal Reserve expectations has boosted Bitcoin price and the cryptocurrency market generally. Currently, BTC price is trading in bullish sentiment with a price increase of 0.08% and is currently sitting at $71,145. 

The Federal Reserve Board’s decision to end the Bank Term Funding Program (BTFP) on March 11 has further strained regional banks, amplifying the risk landscape that institutions like Customers Bank must navigate. 

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