A new report from Bloomberg revealed that cryptocurrency companies are still finding it hard to open a checking account in a traditional bank. Entrepreneurs across the world who are working in the digital-assets industry receive millions and billions of dollars in funding from top venture capitalists but fail to secure a bank account.
Crypto-curious but Not Crypto-friendly
While crypto firms are getting billions of dollars from Singapore’s sovereign wealth fund and the likes, banks like JP Morgan Chase and HSBC Holdings refuse to provide the banking services. JP Morgan, which rolled out its prototype digital currency last month isn’t too keen to help crypto firms. The traditional banking sector considers crypto firm “regulatory time bombs,” and they don’t intend to rub shoulders with authority.
Lawyer and professor at the University of Antwerp, Robby Houben detailed the issues, saying:
“No bank is willing to help them out. I have met some really stand-up people in crypto that don’t deserve such a bad reputation and want the sector to be regulated, yet for every one of those, there are plenty of others trying to scam the public, launder money or evade taxes.”
Digital Currencies Are Not Just for Criminals
Cryptocurrencies have attracted criminals and outlaws since the very beginning as they operate outside of the traditional banking system. Silk Road was the most infamous of these cases which were shut down by the FBI in 2013. Over the years, crypto has found some legitimate use cases, but banks find it simpler to maintain a blanket ban, per Coin Center executive director Jerry Brito.
Alameda Research chief, Sam Bankman-Fried noted:
“The standard answer of `just go to your local Chase branch’ doesn’t work in crypto.”
Though it is not illegal to provide banking services to these entities, banks prefer to stay away from regulatory issues.
Kraken CEO Jesse Powell shared his pain on Twitter when he noted how he had to survive in a banking-less industry when Bank of America and JP Morgan Chase closed its payroll account on short notice. Hong Kong based CoinFLEX’s CEO Mark Lamb said that he pays his employees in stablecoins.
Smaller banks are now coming to the rescue of the crypto entities. One of them, Silvergate Bank based in San Diego, said in its IPO filing that crypto businesses have close to $40 billion to deposit. Europe’s Bank Frick and Signature Bank back home are trying to tap into the same market.