Crypto-related businesses across the globe are having trouble gaining access to the most basic financial services, such as opening bank accounts, reports Bloomberg.
Following recent reports of crypto businesses encountering roadblock from local banks in the “Blockchain Island” of Malta, Bloomberg came out with its own story quoting crypto entrepreneurs who face similar problems worldwide.
“The gatekeepers of mainstream commerce are keeping their doors shut to cryptocurrency companies,” proclaims the publication.
Different Regions, Same Problems…
The authors, Alastair Marsh and Silla Brush, cite a number of crypto business representatives from California, Washington, London and Hong Kong, who all share similar experiences of being snubbed at by major banks.
“The standard answer of ‘just go to your local Chase branch’ doesn’t work in crypto. It’s not illegal for big banks to bank the crypto industry, but it’s a massive compliance headache that they don’t want to put the resources in to solve,’’ said Sam Bankman-Fried, the CEO at a Berkley California-based digital-assets trading firm Alameda Research.
Jerry Brito, executive director at Coin Center, a crypto advocacy group in Washington, echoed Bankman-Fried’s sentiments, saying that banks chose the simple option of a blanket ban on deals with crypto businesses, despite growth in the legitimate use of blockchain technology in recent years.
Providing a perspective from Asia, the Hong Kong-based CEO of crypto derivatives exchange CoinFLEX, Mark Lamb, said that while labeling crypto businesses as high risk might have made sense in the early days of the industry, today it’s “indefensible and protectionist”.
Ben Sebley, of London’s blockchain investment, trading and advisory NKB Group used even stronger words, saying that denying basic services to crypto companies is “madness” and that it “forces companies to get creative to solve the problem”.
…And Different Solutions
And creative they got. The crypto entrepreneurs interviewed by Bloomberg shared their responses to being cold-shouldered by the big banks, among them JP Morgan, who refuses to bank crypto business despite its own recent experiment with blockchain-based digital currency.
“I’m washing my hands of them and now avoid banking altogether,” said Lamb, who uses stable coins to payroll his business, while the CEO of crypto exchange Kraken, Jesse Powell, announced in a tweet that he “basically had to employ the arts of a money launderer to survive” by spreading deposits across several banks and storing cash in safety deposit boxes.
However, filling the void in the market are some smaller banks, who are breaking ranks by offering services to crypt businesses. The likes USA’s Signature Bank and Europe’s Bank Frick cited in Bloomberg’s story.
In the meantime, representatives of the big banks, such as JP Morgan and Bank of America, either refused to comment on the topic or, as in the case of HSBC, said that they don’t provide services to crypto exchanges, but pay close attention to digital currencies and their regulations development.
Exploring the reasons for banks’ frigid attitude towards the crypto sector, the report mentions their image of “ticking regulatory time bombs”, crypto’s association with illegal activities, as well as the fact that strict know-your-customer (KYC) and anti-money laundering (AML) laws are not always applicable to crypto companies. According to Bloomberg’s sources, KYC/AML compliance costs the traditional financial sector around US$25 billion a year.