Whilst cryptocurrencies are shaping up to be the “future’s money,” the present is not always smooth or easy. For example, prominent financial institutions often fail to serve as facilitators for crypto-related companies to open accounts, which can create further issues down the road.
As reported by Bloomberg on Sunday, March 3rd, crypto related firms are still having issues to open bank accounts in major financial institutions. Several years have passed since the crypto boom and today, in 2019, the situation is still problematic.
Closing the Door on the Future
As Bloomberg puts it, “the gatekeepers of mainstream commerce are keeping their doors shut to cryptocurrency companies,” and the issue is evidenced day in and day out by crypto companies of several locations that are continually denied basic banking services by influential banks such as JPMorgan Chase & Co. and HSBC Holdings Plc, just to name a few.
The reason behind the situation is because banks still think, despite some strides achieved in the last couple of years, that crypto related ventures are “ticking regulatory time bombs,” which means that they see the failure of digital assets to find common ground in the legal department as a major red flag.
Sam Bankman-Fried has been one of the primary voices when it comes to complaining about the situation, which is seen by many as unfair. Bankman-Fried is the Chief Executive Officer of Alameda Research, a famous quantitative trading firm. He states that the “standard answer of ‘just go to your local Chase branch’ doesn’t work in crypto.”
A Massive Compliance Headache
Whilst the Alameda’s CEO adds that there would be no illegal proceedings if a bank serves crypto projects, it represents a “massive compliance headache that they don’t want to put the resources in to solve.”
“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.” According to Robby Houben, a lawyer and professor at the University of Antwerp responsible for co-authoring a paper for the European Parliament on financial crime involving cryptocurrencies.
The problem is more evident with large companies in the financial world, but there is a silver lining: small banks are making an honest attempt to attend this segment of the market. One of such institutions is the Silvergate Bank in the city of San Diego, a company that stated in November that crypto firms have up to $40 billion to deposit.
Examples in the Industry
BitPay is a perfect example of a firm that has been rejected by banks for quite some time now. According to Bloomberg’s report, Sonny Singh, the crypto payment processor’s Chief Commercial Officer, expressed that BitPay has been rebuffed by numerous financial institutions, not just one.
NKB Group, a blockchain trading, investment, and advisory company, is yet another example to establish successful relationships with traditional banks. According to Ben Sebley, the firm’s head of brokerage, stated that “denying basic banking is madness, impedes sector growth and forces companies to get creative to solve the problem […] The banks are being overly prudent.”
By Andres Chavez