U.K.-based cryptocurrency exchange CEX.io has joined the Silvergate Exchange Network (SEN), the payment rail connecting major customers of Silvergate, the go-to bank of the crypto space.
In an interview with CoinDesk, Steve Gregory, chief compliance officer and corporate counsel of CEX.io Corp, called Silvergate “the gold standard” when it comes to U.S. crypto compliance, and said joining SEN meant being included in a kind of institutional crypto “club”.
By participating in SEN, CEX.io is connected directly to big institutional crypto players like Coinbase Prime, Cumberland, Kraken OTC, BitStamp, Jump and Circle, to name a few.
CEX.io, which began offering services to US customers in 2015, established a headquarters in Jersey City, NJ, and now holds some 17 state licenses to operate its exchange. The company has 250 staff and operates in 180 countries.
Gregory was formerly a compliance officer at Gemini, the New York Department of Financial Services (NYDFS)-regulated exchange founded by Tyler and Cameron Winklevoss, which also recently joined SEN.
He told CoinDesk:
“We are in the club now. Silvergate is the biggest bank in the space and with the SEN and we can facilitate trades to some of those larger institutions that are members.”
SEN provides Silvergate’s large institutional clients an instant fiat payment rail, 24 hours a day, seven days a week. This means if a proprietary trading house such as Cumberland, for example, wants to move a few million dollars to CEX.io, this can be done without using a wire transfer.
Silvergate’s internal online banking uses an API to transfer the funds instantly on an internal ledger. “Instead of doing a wire and then a wall to wall transaction, we can just have Silvergate move our balance of USD,” Gregory said.
Although there is no hard data on how many firms are in the SEN and regularly using its internal payment rail (Silvergate is currently in an IPO quiet period and unable to comment), users of the service say the number of transactions is significant.
Removing counterparty risk from OTC crypto trades and enabling them to be always on is a good idea, which is also being explored by the likes of BitGo and OTC desk Genesis, as well as Kingdom Trust and trading firm OTCXN.
US plans
There’s a short list of banks that will handle crypto companies. CEX.io US also recently became a customer of Nevada-licensed trust company Prime Trust, which now provides the fiat on-ramp and banking relationship for Binance U.S. Signature Bank is another popular crypto bank, which CEX has worked with.
“Signature Bank has been great to us and has been efficient and seamless to work with,” said Gregory. “Signature does have the unfortunate limitation that they cannot process retail wire and ACH transfers under $50,000 without batching the transactions.”
Based on this limitation, he said CEX.io “will use Silvergate for retail, under $50,000, ACH and wire deposits or withdrawals.”
In addition to the 16 or so U.S. states that don’t require a license, CEX.io has acquired licenses to operate in: Alaska, Florida, Georgia, Iowa, Kansas, Maryland, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, South Dakota, Vermont, and West Virginia.
The firm applied for a BitLicense in the spring and held initial meetings with the NYDFS, said Gregory. A CEX.io spokesman added that the anticipated approval would be “in a few months from the NYDFS which administers the Bitlicense and the New York Money Transmitter License.”
Speaking to the “high barrier to entry” when setting up shop in the U.S, Gregory pointed out that setting up surety bonds in order to operate in each state is expensive, especially while having to wait to get a license application looked at, concluding:
“It makes it tough to disrupt some of the bigger exchanges that are already established.”