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Amid all sorts of regulatory pressure, firms in the blockchain and cryptocurrency industry are also still struggling to open bank accounts. Not only big banks such as HSBC or JPMorgan Chase deny regular banking operations from crypto and blockchain companies, but also the majority of small banks as well. It has been a decade now since the launch of Bitcoin and thereafter other altcoins, but it seems as if in many banks across the globe, cryptocurrencies just can’t earn their deserved place.
Founders of many digital asset startups from New York to Hong Kong say that banking giants have refused to avail the banking services even when some of them attract investment from multi-billion dollar institutions and even governments like Singapore’s sovereign wealth fund.
“No bank is willing to help them out,” said Robby Houben, a lawyer and professor at the University of Antwerp. He further explained that he had met a number of peers in the crypto industry who don’t deserve such reputation and do want the crypto industry to be more regulated.
A recent Bloomberg report published on March 3rd also cites the statement of Sam Bankman-Fried, chief executive officer of Alameda Research, a digital-assets trading firm in Berkeley, California. He says that “[t]he standard answer of `just go to your local Chase branch’ doesn’t work in crypto.’’ In addition to that, he also elaborates further on the legality and convenience aspects of serving crypto firms. “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.’’
The situation is even worst for cryptocurrency exchanges. Jesse Powell, CEO of the crypto exchange Kraken tweeted in January that he had to hire money laundering experts to keep the exchange in operation when JPMorgan Chase and Bank of America closed the Kraken’s payroll account on short notice. Another example is the crypto payment processor BitPay; while having the former chairman of the United States Securities and Exchange Commission as an adviser, BitPay has been turned down by many banks, said Sonny Singh the company’s chief commercial officer.
On the contrary to the large banks, some relatively small financial service companies are trying to find opportunities in this untapped market. During its IPO filing in November last year, the San Diego-based Silvergate Bank said that crypto firms had as much as $40 billion to deposit. Other small banking firms which are standing side by side next to crypto firms include Bank Frick in Europe and Signature Bank in the U.S.
“Denying basic banking is madness, impedes sector growth and forces companies to get creative to solve the problem,” said Ben Sebley, NKB Group head of brokerage, a blockchain investment company. “The banks are being overly prudent.”
Are they really “prudent,” or just trying to eliminate the competition?