The recent unraveling of the acquisition deal between BitGo and rival Prime Trust highlights the potential pitfalls and skepticism surrounding the crypto banking industry. Just two weeks ago, BitGo signed a letter of intent to acquire Prime Core Technologies Inc., Prime Trust’s parent company. This merger would have combined the companies’ technical infrastructure and shared BitGo’s banking services. However, various incidents have caused BitGo to terminate the agreement abruptly.
The short-lived acquisition faced early troubles. Within a week of the deal’s announcement, Banq, a Nevada-based crypto payments and savings platform owned by Prime Trust, filed for bankruptcy due to allegations of mismanagement and legal woes. Banq listed $17.72 million in assets and $5.4 million of liabilities. Soon after, crypto investment company Abra, which utilizes Prime Trust as its main custodian, received a cease and desist order from Texas regulators and accusations of securities fraud. These setbacks generated significant concern about the stability and regulatory standing of crypto banks.
Prime Trust, one of the last “crypto banks” in existence, has struggled to maintain a secure and trustworthy image. Nevada financial regulators issued a cease and desist order to the company, prompting it to halt all digital and fiat currency withdrawals. In response, BitGo decided to withdraw from the acquisition, saying it was “not made lightly” and that they remain committed to business as usual without providing further details.
As one of the four primary “crypto banks” once in operation, Prime Trust now faces an uncertain future alongside Silvergate, Silicon Valley, and Signature Bank. There have been allegations that regulators systematically target these crypto-friendly institutions due to their connections within the industry. While it remains to be seen how this trend will affect crypto banking’s longevity, BitGo’s withdrawal from the acquisition deal suggests a serious issue within the space.
Moreover, crypto exchange CoinMetro, which relies on Prime Trust as its payment partner, has had to suspend U.S. dollar withdrawals on its platform due to this halted acquisition. CoinMetro announced on Twitter that an “unexpected disruption in USD transactions” had occurred and is working to add alternative payment partners to their ecosystem.
In conclusion, while the world of cryptocurrencies evolves and expands rapidly, the collapse of the acquisition between BitGo and Prime Trust shines a light on the inherent risks and instability that still plague the industry. This event serves as a potent reminder that investors and participants must remain vigilant and cautious when dealing with crypto banks and related ventures. The outcome of regulatory pressure on these financial establishments could significantly impact the growth and progress of blockchain technology and cryptocurrency adoption in the coming years.
Source: Decrypt
