Cryptocurrency and blockchain startups have increasingly been receiving large amounts of investments from traditional financial institutions. However, these crypto-related firms have reportedly been denied banking services by JPMorgan Chase and HSBC Holdings Plc.
That’s according to recent article published by Bloomberg, which pointed out that giant investment banks such as JPMorgan now seem to be more interested in the crypto space. After Jamie Dimon, the CEO of JPMorgan, had referred to bitcoin (BTC) as a “fraud” (about a year back), the largest bank in the US recently launched its own cryptocurrency, the JPM Coin.
Traditional Financial Institutions Refusing To Work With Crypto Firms
Commenting on the restrictions placed on crypto firms, Robby Houben, a legal consultant and professor at the University of Antwerp, remarked:
No bank is willing to help them 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.
Meanwhile, Jerry Brito, the executive director at Coin Center, an organization focused on creating “sound government policy” for cryptocurrencies and blockchain technology, said that banks might not be carefully reviewing banking applications from digital asset firms. These companies, Brito argued, may not have been allowed to open bank accounts simply because they are providing crypto-related services - even though they might have made the effort to comply with regulatory guidelines.
Kraken Exchange CEO Denied Banking Services
Sam Bankman-Fried, the CEO at Alameda Research, a California-based crypto research company, revealed:
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.
Notably, Jesse Powell, the CEO of US-based digital asset exchange, Kraken, remarked via Twitter in January that he “basically had to employ the arts of a money launderer to survive.” Powell claimed that he had not been allowed access to basic banking services by Bank of America and JPMorgan, which are two of the largest US-based financial institutions.
Some Banks Are Interested In Serving Crypto Firms
The Silvergate Bank in San Diego, which offers lending services to small and medium sized companies (SMEs), noted in its November 2018 initial public offering (IPO) that cryptocurrency-related companies were looking to deposit an estimated $40 billion (in total).
According to Bloomberg, the US-based Signature bank and Europe’s Bank Frick are also interested in working with businesses operating in the crypto industry.
Mark Lamb, the CEO of CoinFLEX, a Hong Kong-based cryptocurrency derivatives trading platform, has said he has been paying salaries in various cryptos - including the world’s largest stablecoin, Tether (USDT). Lamb noted:
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. I’m washing my hands of them and now avoid banking altogether