Bitfinex disables deposits as it reportedly loses its banking ties

Posted: 12 October 2018 6:36 pm
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Rumour has it that Bitfinex's under-the-radar HSBC bank account has been closed.

Bitfinex has suspended fiat deposits for a week, according to its Reddit representative garbis_bitfinex. It seems the news didn't reach the Bitfinex social media team until it broke elsewhere.

Worth panicking over?

The suspension of fiat deposits comes right as Bitfinex and Tether go through another wave of insolvency fears, spurred by the alleged sale of Noble Bank.

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But before jumping to the worst case scenario, it's worth emphasising that only deposits are suspended. Withdrawals are still working as usual, that is, "usual" by Bitfinex standards but with a higher error rate than one would typically desire from a financial institution.

It's not clear why deposits have been suspended, though it might be related to an upheaval in banking solutions. The upheaval in question might refer to the rumored failure of Noble Bank, which might be reasonably expected to have previously been providing banking solutions for Bitfinex. With that gone, Bitfinex might have been scrambling for an alternative fiat lifeline.

According to sources at The Block, Bitfinex is now with HSBC "through a private account of Global Trading Solutions".

"Due to the nature of the private account, it is not clear whether HSBC is aware that Bitfinex is banking with the firm. Nor is the extent of the relationship between the two firms clear," The Block says.

It's possible that Bitfinex's banking arrangements are in flux once again. The Block says the HSBC account is inactive, which suggests that this is what's happened.

"Now it appears that the private account is no longer functional. Bitfinex currently has no active method of deposits as all USD, EUR, JPY and GBP deposits are paused."

Connecting the dots

If you connect the dots, make a small leap and assume that all the sources are accurate, it looks like HSBC dropped Bitfinex after becoming aware of its account. That this happened so soon after Noble Bank went under might put Bitfinex in a rather tough commercial position, unable to accept customer fiat deposits until it finds a new solution.

It would be a tough problem to solve within a week. The general assumption might be that if Bitfinex had access to more banking options, it wouldn't be in this position right now, or using an under-the-radar HSBC account.

That garbis_bitfinex hasn't received word from upstairs has drawn some comparisons to Mt. Gox.

It might not be good for business, and it certainly doesn't help that it's coming at the same time as the Tether and Noble Bank troubles, but there's still no sign that Bitfinex is insolvent the way that Mt. Gox was. Assuming that fiat deposits will come back within a week might be a bit optimistic, but it might be hard to panic over suspended deposits as long as withdrawals are working.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA

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