A report by Bloomberg has established that digital currency firms across the world are having a hard time opening bank accounts.
Despite leading banks slowly taking steps towards cryptocurrencies, the banks are not comfortable offering banking services to digital currency firms. According to the report, traditional financial institutions are avoiding crypto firms in the same way they have been avoiding the cannabis industry.
Robby Houben, a lawyer and a university professor, said that:
No bank is willing to help them [digital currency firms] 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.
Sam Bankman-Fried, the CEO of the crypto trading firm, Alameda Research, noted that while the banks would not be breaking the law when offering banking services to digital currency firms, the banks are avoiding the “compliance headache” that comes with cryptocurrencies.
Digital currency firms being denied banking services led Kraken’s CEO, Jesse Powell, to “employ the arts of money launderer to survive” after two Wall Street banks, Bank of America and JP Morgan, terminated their account.
Even after JP Morgan launched its own stable coin, the bank does not offer banking services to digital currency firms. Another bank, HSBC, indicated it is still “monitoring the development of digital currencies and regulations governing their use,” and does not offer banking services to digital currency firms.
However, smaller traditional financial institutions are tapping into this gap and offering banking services to the discriminated parties.
For example, San Diego-based Silvergate Bank indicated that “crypto businesses have as much as $40 billion to deposit.” Other banks seeking to offer banking services to digital currency firms include Bank Frick in Europe and Signature Bank based in the United States.
According to Bloomberg:
Anti-money laundering rules typically require banks to know the identity and aims of their clients and often be able to trace the source of their customers’ cash. Building a compliance and monitoring system is expensive and some banks conclude the costs just aren’t worth it.
When do you anticipate traditional financial institutions across the world will openly start offering banking services to digital currency firms without discrimination?
Let us know your thoughts in the comments section below.