Over the past few years, cryptocurrencies have gained massive popularity and even mass adoption. However, commercial banks are still cautious about offering basic banking services to crypto businesses, according to a March 3 Bloomberg report.
The report pointed out that major banks including HSBC and JP Morgan Chase are hostile towards their clients involving in cryptocurrencies mainly due to regulatory uncertainties.
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Sam Bankman-Fried, chief executive officer of digital-assets trading firm Alameda Research, told Bloomberg: “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.”
Interestingly, JP Morgan Chase has recently revealed that it is working on the development of its own cryptocurrency – JPM Coin – to increase settlement efficiency.
BitPay’s chief commercial officer Sonny Singh confirmed that the crypto payment processing company was turned away by an array of banks. He pointed out that the banks’ rigid know-your-customer and anti-money laundering policies become a barrier as they “don’t adjust for working with crypto companies.”
“The banking system has never been friendly to crypto, and while maybe that made some sense in the early days, continuing to label all crypto businesses as high-risk is indefensible and protectionist,” Mark Lamb CEO of CoinFLEX said. “I’m washing my hands of them and now avoid banking altogether.”
Small Players See an Opportunity
Despite the hostility of big banks, smaller lenders are welcoming businesses from the nascent sector as they see it as an industry involving billions of dollars, according to Bloomberg.
In November, San Diego-based Silvergate Bank estimated that crypto businesses have around $40 billion to deposit in its filing for an initial public offering.
Banks are not the sole mainstream financial business hesitating to serve the crypto industry. Last December, Finance Magnets reported that crypto traders and exchanges are being turned away by the insurance companies in Asia, making a huge dent in the sector.