Cryptocurrency companies have difficulty opening bank accounts — this may be a surprising statement, but according to a Bloomberg report earlier today, it’s true.
A prime example given by the report is that of Sam Bankman-Fried, CEO of Berkeley, California-based cryptoasset quant trading firm Alameda Research.
“The standard answer of ‘just go to your local Chase branch’ doesn’t work in crypto,” said Bankman-Fried, “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 to solve.”
But it’s not just boutique trading shops that are subject of this sort of implied policy. The Bloomberg article mentions the example Jesse Powell, CEO of crypto exchange Kraken, which processes more than $2 billion each month, who claimed on Twitter in January that he “basically had to employ the arts of a money launderer” to survive” after JP Morgan Chase and Bank of America closed Kraken’s payroll account with little warning.
However, while the big banks turn their backs on crypto companies — for now — smaller ones have tried to fill the void, capitalizing on the inefficiency in the market. Per the Bloomberg report, Silverlake Bank in San Diego revealed in their initial public offering (IPO) filing in November that crypto companies have as much as $40 billion worth of funds to deposit. Signature Bank in the United States and Bank Frick in Europe are two notable examples of mid-sized banks who are currently trying to gain market share in the crypto sector.
Still, there are a number of examples of legitimate crypto companies being turned away by banks. London-based blockchain investment trading and advisory firm, NKB Group, has had a difficult time establishing a banking relationship, according to Ben Sebley, the company’s head of brokerage. Despite months of discussions with prospective banks and a lengthy vetting process, the fact that NKB is associated with cryptocurrency is too big an obstacle to overcome.
“Denying basic banking is madness, impedes sector growth and forces companies to get creative to solve the problem,” Sebley said, “The banks are being overly prudent.”