Sam Bankman-Fried, CEO of quantitative crypto trading company Alameda Research has complained to Bloomberg that “the gatekeepers of mainstream commerce are keeping their doors shut to cryptocurrency companies.” As he said, “the standard answer of ‘just go to your local Chase branch’ doesn’t work in crypto.”
Bankman-Fried also added that while it is not illegal for banks to serve crypto-related businesses, “it’s a massive compliance headache that they don’t want to put the resources in to solve.’’
It is known in the industry that entrepreneurs in the digital-assets industry worldwide, even though they may attract investment from multibillion-dollar institutions like Singapore’s sovereign wealth fund, they are routinely refused basic banking services by the likes of HSBC and JPMorgan Chase.
Robby Houben, a lawyer and professor at the University of Antwerp who co-authored a paper for the European Parliament on financial crime involving cryptocurrencies told Bloomberg: “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.”
Discussing the fact that crypto has been tainted by ‘outlaws’ like Silk Road, Jerry Brito, executive director of crypto advocacy group Coin Center in Washington said that although, “legitimate uses have mushroomed in recent years, it’s simpler for banks to maintain a blanket prohibition.”
Jesse Powell, CEO of crypto exchange Kraken, claimed businesses like his are caught in the middle. In January he tweeted, “basically had to employ the arts of a money launderer to survive” after JPMorgan Chase and Bank of America Corp. closed Kraken’s payroll account on short notice.
Sam Bankman-Fried isn’t the only one complaining. In London, blockchain investment, trading and advisory firm NKB Group has struggled to establish banking relationships, said Ben Sebley, NKB’s head of brokerage. Sebley told Bloomberg that the company’s association with cryptocurrencies is often an insurmountable obstacle, even after months of detailed discussions with potential banking partners: “Denying basic banking is madness, impedes sector growth and forces companies to get creative to solve the problem,” he said. “The banks are being overly prudent.”
On the upside, there are banks that are willing to open accounts for crypto-related businesses, such as Signature Bank in the U.S. and Bank Frick in Europe.
Crypto businesses aren’t the only ones getting the cold shower from the traditional banks: the cannabis industry faces similar problems.