The giants of the mainstream commercial market called Banks, are pushing away cryptocurrency companies. Leaders of the digital assets industry from across the globe are complaining that the banks like HSBC Holdings Plc and JPMorgan Chase & Co. have kept their doors closed, in spite of the fact that some of the crypto companies have struck investment deals from multi-billion-dollar institutions like Singapore’s Sovereign Wealth Fund. Companies have accused they are routinely refused for basic banking services.
Though large banking institutions have shown keen interests in the crypto space, most of them believe that the growing number of crypto companies are the reason behind ticking regulatory time bombs. For instance, JPMorgan itself is about to launch its own digital coin, but still, the bank has shown hesitation in allowing crypto companies in its space. The main point is that the regulations pending for cryptocurrencies are expected to create a complete change in the crypto space, which might hurt their bankers. Therefore, banks are refusing to take any risks.
However, Crypto space isn’t the only industry facing rejections from the traditional banking fraternity, which hurts development. A federal prohibition on marijuana has prevented giant US banks from dealing with the cannabis industry too.
Robby Houben, a lawyer, and professor at the University of Antwerp, and co-author of a paper on the European Parliament on financial crimes involving cryptocurrencies stated that no bank is willing to help the cryptocurrency companies. He added that several individuals in the crypto space have undeserved bad reputation which is making them bleed. Houben also said that he wants the sector to be regulated, though, pointing out that notorious hackers and their scams are still very much prevalent in the digital currency market.
Sam Bankman-Fried, CEO of the quantitative crypto trading company, Alameda Research, reportedly complained that they are usually turned down by getting the answer “just go to your local branch”, which cannot materialize in crypto space. According to him, the massive compliance issue is what bothers the bank, which would require them to invest resources, and that they don’t want to. Sam also said that serving crypto companies wasn’t illegal at all for the banks.
Even in India, stakeholders of the crypto industry have been fighting banking restrictions imposed on them. In April 2018, the Reserve Bank of India released a circular, asking all commercial banks to stop serving crypto transactions. As the circular order came in to effect in July, all the banks suspended their services for cryptocurrencies. This forced the largest crypto exchange in the country, Zebpay, shut its operations in the world’s fastest growing economy.
Crypto companies are facing similar problems in Malta as well. As per reports, banks are denying applications from crypto companies, stating ‘high-risk appetite’ as the reason for rejection. From New York to Hong Kong, the crypto industry is being denied basic banking amenities by large banks which is literally killing them.
However, small banks see this as a golden opportunity for them and are making efforts to capitalize on it. For instance, San Diego based Silvergate Bank recently said that it is keen to open up for crypto companies and is taking dedicated efforts to meet their banking requirements. At the time of its IPO in November 2018, the bank said that the crypto space has over $40 billion to deposit.
Interestingly, Julius Baer, one of the largest banks in Switzerland, has been positively receptive towards crypto companies. The bank revealed plans to give its clients access to digital asset services, following a partnership deal with crypto bank start-up Seba Crypto.