Bloomberg reveals crypto companies in the U.S. denied banking services


Financial pundits warning that 2020 will be “The Year of the Next Big One”

A persistent problem that all crypto related companies face not only in the U.S. market, but also in many other global jurisdictions, is the inability to obtain even the most basic of banking services from domestic banking institutions. Bloomberg starts by quoting a complaint from Sam Bankman-Fried, CEO of quantitative crypto trading company Alameda Research:

The standard answer of ‘just go to your local Chase branch’ doesn’t work in crypto.” Bankman-Fried went on to say that banks have a legal right to pick and choose their clientele, whom they prefer to be on the low end of risk profiles or “it’s a massive compliance headache that they don’t want to put the resources in to solve.’

Bloomberg also cited Sonny Singh, chief commercial officer of BitPay, an established crypto payment processor for several years with a former chairman of the United States Securities and Exchange Commission as an adviser: “The company has been turned away by many banks.” Lastly, Ben Sebley, the head of brokerage for the NKB Group, a blockchain investment, trading and advisory firm, commented:

Denying basic banking is madness, impedes sector growth and forces companies to get creative to solve the problem […] The banks are being overly prudent.

The demographics of banking in the U.S. market are quite unique, unlike what you might find in other developed countries across the globe. In any other country, there may only be a handful of major banking institutions that willingly sit down with their respective central banks and debate policy. In the U.S. market, you have three tiers of financial institutions. The top two tiers are generally reticent to deal with startups or any entity that could pose potential risk to the organization. Banks are heavily regulated and must provide risk-based analyses to support all decision-making.

The lower tier of banks, which may constitute thousands of entities, is more willing to take risks, especially with startups. Bloomberg noted that Silvergate Bank in San Diego said back in November in its initial public offering documents that crypto companies could have as much as $40 billion in deposits, an opportunity that is waiting for the right bank to address.

Obtaining basic banking services is typically problematic in underdeveloped economies, where the IMF has actually stated that cryptocurrencies could do the most good. India is currently relaxing its take on cryptocurrencies and blockchain technology, but the Reserve Bank of India, the central bank, has forbidden all banking members from providing any support to crypto related enterprises. One notable crypto exchange has had to shut its doors due to this quasi-ban.

Even in countries like Malta and Switzerland, which have openly courted crypto related companies and adopted accommodative regulations to support their actions, have similar banking issues. Malta is considered a “crypto paradise” and has recently become the Number One processor of crypto volumes in the world, but according to one insider:

Thus, while the blockchain media has made Malta its destination darling, the reality is far more sobering. It’s an island dedicated to playing an active role in shaping regulations around blockchain and cryptocurrency, yes, and shaping them as pro-startup as possible, but it’s not a place where anything goes. At least, not presently where bank accounts are concerned.

Switzerland also falls into the same category as Malta – Banks are reluctant to deal with anything crypto, but blockchain development companies meet their appetite for risk. The latest news in this country, however, is that a major Swiss bank, Julius Baer, has partnered with crypto bank startup Seba Crypto to open bank accounts for all crypto comers. Perhaps, Crypto Winter is beginning to thaw.

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Bloomberg reveals crypto companies in the U.S. denied banking services

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