Vast Bank closes its cryptocurrency app and services to return to traditional banking following accusations of “unsafe practices.” British bank JPMorgan’s Chase banned cryptocurrency payments in September 2023 amid growing concerns about scams. The bankruptcies of Silvergate and Silicon Bank in early 2023 were the catalysts for regulators to go after banks offering crypto services.
Vast Bank has announced the termination of its crypto banking application and services, marking a significant setback in its once pro-cryptocurrency stance. This decision underscores the growing trend among financial institutions to prioritize stability over innovation in the face of regulatory challenges.
Vast Bank, a pioneer in integrating cryptocurrency transactions with conventional checking accounts, recently declared the closure of its Vast Crypto Mobile Banking app.
Another Crypto-Friendly Bank Withdraws Support
The measure, effective from January 31, 2024, involves disabling the app from the Google and Apple app stores, leading to the liquidation and closure of all digital asset accounts.
This marks a fundamental change for Vast Bank, which initially launched its crypto-friendly app in 2019 in partnership with Coinbase and SAP. It allowed customers to manage cryptocurrencies alongside traditional banking services.
The bank’s pivot aligns with a broader industry trend, as seen with bank JPMorgan Chase UK, which, amid escalating scam concerns, banned crypto payments in September 2023. The banking giant took action to prevent British customers from transferring funds to cryptocurrency companies and blocked cryptocurrency trading with Chase debit cards.
This move by the JPMorgan-owned bank reflects growing apprehension within the financial sector, despite cryptocurrency trading being a financial activity regulated by the new UK Financial Services and Markets Act.
The journey towards digital banking has been fraught with challenges for Vast Bank. In late 2023, the Office of the Comptroller of the Currency issued a consent order citing the bank’s cryptocurrency activities. The official consent order stated the following:
“The Comptroller finds, and the Bank neither admits nor denies: The Bank has engaged in unsafe or unsound practices, including those related to capital; strategic and capital planning; liquidity risk management; project management; books and records; interest rate risk management; computer controls; new product risk management; and controls of their custodial accounts.”
This regulatory scrutiny was most likely a key factor in the bank’s decision to return to its core banking services.
Crypto Banks: The Spark that Set the Fire
The bankruptcies of cryptocurrency-friendly banks such as Silvergate and Silicon Valley Bank in early 2023 further shook the sector. These incidents were the main catalysts for increased regulatory scrutiny in the United States, prompting a re-evaluation of crypto services by banks.
The bankruptcies of these banks highlighted the risks associated with digital assets, and led to a tightening of regulatory policies and greater attention to risk management.
In light of these developments, Vast Bank’s exit from the cryptocurrency sector serves as a warning, and highlights the need for financial institutions to balance innovation with strict risk management, and focusing on complying with regulatory standards.
As the bank returns to traditional banking practices, it leaves behind a legacy of pioneering digital asset integration. Their venture, while promising, ultimately proved unsustainable in the current regulatory climate.
While institutions like Vast Bank rethink their participation in the cryptocurrency space. Therefore, the financial sector in general strives to find a balance in taking advantage of opportunities.
By Leonardo Perez