Cryptocurrency exchanges, wallet providers and other companies in the cryptocurrency industry are still experiencing difficulties opening and operating conventional bank accounts around the world, a Bloomberg report says.
“The gatekeepers of mainstream commerce are keeping their doors shut to cryptocurrency companies,” Bloomberg wrote in the report published on Sunday, March 3.
To buttress its claim, the business news outlet sought input from interested experts, one of which is Robby Houben a lawyer and professor at the University of Antwerp. Houben who co-authored a paper for the European Parliament on crypto-related financial crime, said that “no bank is willing to help [crypto businesses] out.”
CEO of crypto trading company Alameda Research, Sam Bankman-Fried added his voice to the debate. He complained that crypto companies cannot easily access banking services like their counterparts in other industries.
“‘Just go to your local Chase branch’ doesn’t work in crypto,’’ he said, adding that:
“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.’’
Why is it hard for crypto companies to get bank accounts?
While they are not illegal, crypto businesses are shunned by most regular banks because the industry is largely unregulated and perceived to be prone to criminal activities.
Bloomberg notes that cryptocurrencies have attracted outlaws since the introduction of Bitcoin, majorly because they (cryptocurrency networks) “obscure the identities of parties in a transaction and operate outside the regulated financial system.” A large percent of the public now identify crypto with cybercrime and other such scams.
This perception of the crypto industry as riddled with corruption is misleading and in many cases unfair. As professor Houben observes, this curse is caused by the several bad players who are within the system.
“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.”
Crypto is not alone in the perceived Banking Blockout
Industries with unclear regulations especially at the Federal level are often avoided by regular financial institutions. Take marijuana for instance, it has been legalized in some states but still remains prohibited by Federal laws.
“Crypto isn’t the only novel industry having a hard time accessing traditional banking to support its development: a federal prohibition on marijuana has kept big U.S. banks out of the cannabis industry too.”
Cases of Crypto Operators Rejected By Banks
Bitpay and Kraken crypto exchange are one of the high-profile crypto players that have been rejected by commercial banks in the recent past. Sonny Singh, the chief commercial officer of BitPay, a crypto payment processor said that the company has been rejected by many banks.
Kraken CEO had lashed out in January after the exchange were put in a difficult position when the American banks JPMorgan Chase and Bank of America Corp. decided to shut the exchange’s account on very short notice.
Even in Malta, which is largely blockchain-friendly, crypto businesses are reportedly having a difficult time accessing basic banking services.
Note: Information from Bloomberg News site was used in this report