Major Banks Still Saying No to Crypto Startups
Despite the fact that interest and involvement in the cryptocurrency industry is growing, most mainstream financial institutions are still not willing to provide their banking services to cryptocurrency startups.
Most Banks Still View Crypto Startups as Dangerous
Crypto entrepreneurs across the world state that even while some of them are able to attract institutional investors such as the Singaporean sovereign wealth fund, they are regularly denied banking services from major banks such as JP Morgan Chase & Co and HSBC Holdings Plc.
This is despite the fact that some banking majors have actively started investing their resources in Blockchain and cryptocurrencies. One major example is JP Morgan, which has launched its own cryptocurrency called JPM Coin in February.
However, in spite of the growing interest, most major banks are still wary of crypto startups, viewing them as dangerous since the industry still does not have clear regulations governing it.
According to quantitative cryptocurrency trading firm Alameda Research’s Chief Executive Officer Sam Bankman-Fried, while it is not illegal to serve crypto startups, banks still face significant compliance challenges when dealing with these companies. Therefore, Bankman-Fried states, most banks do not want to assign resources to solve these compliance issues.
Another example is given by the Chief Commercial Officer of crypto-payment processor BitPay, Sonny Singh. The company has a former US SEC (Securities and Exchange Commission) chairman as its advisor. Despite that kind of support, the company has been rejected by multiple banks and has struggled to open a bank account.
A third example of a crypto major struggling to get banking services from mainstream financial institutions is the Blockchain based investment, advisory and trading firm NKB Group. The company’s head of brokerage Ben Selby states the over cautious attitude of the mainstream banks is madness and is hurting the growth of the cryptocurrency sector.
Smaller Banks Targeting Crypto Sector
While the bigger banks are refusing to give their services to cryptocurrency-based companies, the smaller banks are targeting this sector actively. In fact, in its filing for an IPO (Initial Public Offering) in November 2018, San Diego based Silvergate Bank stated that crypto-related businesses had as much as $40 billion in funds that they will to deposit.
Other banks such as Signature Bank and Bank Frick have openly stated that they are courting crypto-based companies. Signature Bank announced recently that it is going to start providing banking services to the crypto sector in Bermuda.