TrueUSD Backer Archblock Shifts $1 Billion in Reserves to Capital Union Bank in the Bahamas

Archblock, the operator of the TrueUSD stablecoin, has transferred $1 billion in reserves to Capital Union Bank in the Bahamas. This decision comes as digital asset companies continue to seek alternative homes for their cash following the collapse of several crypto-friendly lenders in the United States.

Archblock oversees the approximately $2 billion in reserves backing its TrueUSD stablecoin and now holds more than $1.4 billion of those funds with Nassau-based Capital Union Bank, a real-time attestation by an independent accounting firm showed on Wednesday.

Stablecoins, like TrueUSD, are digital tokens that are designed to keep a 1-to-1 value with a less volatile asset like the US dollar. They typically do this by holding large reserves of cash and cash-equivalent assets as collateral. They are commonly used by traders as a way of transferring funds between exchanges and as a safe haven from price swings, making them a vital cog in the system as some of the crypto sector’s most-traded tokens.

The decision to move funds to Capital Union in recent days was the result of worsening banking conditions for crypto businesses in the US, according to Alex de Lorraine, Archblock’s Chief Financial and Operating Officer. “Even operational accounts to just pay taxes, administer payroll and pay expenses are very difficult to get if one is not a multibillion-dollar business,” he said in a message late Tuesday.

The failure of three banks in quick succession – Silvergate Bank, Silicon Valley Bank, and Signature Bank – all closed by US regulators or wound down voluntarily this month, left many digital asset companies scrambling to find new solutions for parking their own cash and allowing clients to transfer funds. Another stablecoin operator, Circle Internet Financial Ltd., saw its USD Coin token temporarily lose its dollar peg after revealing it had $3.3 billion deposited with Silicon Valley Bank.

Crypto firms have traditionally struggled to establish banking relationships, with lenders wary of the sector’s reputation for lax know-your-customer and anti-money laundering controls. “The failure of the recent banks just highlights the concentration risk that was created by lack of clear regulations,” said de Lorraine. “I doubt you would have seen anything like the turmoil in the last 72 hours if companies like ours would have been allowed to bank with Citi or JPMorgan.”

Archblock had more than $852 million deposited with Signature Bank as of Monday, screenshots of its attestations recorded by data analytics firm ChainArgos showed, with a further $202 million already in transit to Capital Union by that time. Archblock confirmed the transfers. A representative for Capital Union did not respond to a request for comment.

US regulators and some industry executives have voiced growing concerns about crypto companies heading offshore, as it puts them further away from the reach of enforcement authorities. The collapse of crypto exchange FTX in November was seen by many as a manifestation of that problem, with much of the group’s activities carried out by its international entity in the Bahamas.

Capital Union Bank is already a well-known partner for crypto businesses and offers clients the ability to deposit and transact in digital assets within the same account as traditional currencies or assets. The firm is one of the banking partners for stablecoin issuer Tether Holdings Ltd., the Financial Times reported last year. “We moved money to Capital Union Bank mainly to secure funds as we are able to go straight into very short-term US Treasuries, which in itself is funny,” de Lorraine said. “The funds are with the US, but we need to use an offshore bank to achieve that.”

Although some regulators and industry executives have expressed concerns about crypto companies going offshore, the move by Archblock underscores the ongoing search for a safe haven for crypto cash. The stablecoin market is still very uneven, with Tether’s USDT being the largest by far at $74 billion in circulation, followed by Circle’s USDC at $38 billion.

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