Although cryptocurrencies continue to grow in popularity across the world, banks are still hesitant to serve the various crypto companies out there. Though several banks are curious about branching out in to the crypto industry, many of them are still denying crypto companies basic services like checking accounts and traditional services.
The main problem that most banks have with crypto companies is the fact that regulators might suddenly come down on them hard. This could potentially hurt banks that are associated with them. This is the same reason why a lot of banks are hesitant about working with the booming cannabis industry in the United States. While several states have legalized it – federal law can still hit the industry hard and it is the same concern posed with the crypto market.
In a statement, Robby Houben, a lawyer and professor at the University of Antwerp said
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.
It does not help that crypto has earned a reputation as a haven for digital outlaws ever since bitcoin appeared. Cryptocurrencies have been used for untraceable purchases and connected to various illicit activities for a decade now. Although legitimate use has increased in recent years, the stigma of criminal use is heavy on them. For banks, it is much easier to deny all services to them.
Another problem is that regulators worldwide have been turning up the heat by placing stricter rules on crypto businesses. They now have to face tougher standards as well as new licensing requirements. This is especially with the new derivative market which is based on cryptocurrencies. These new products need to meet banking and securities laws in the US. This has further slowed down the development of such products.
Wall Street is also taking the slow approach. JP Morgan recently unveiled its new JPM Coin but is still adamant about not banking crypto businesses. Other banks like HSBC say that they are monitoring how cryptocurrencies develop and the regulations around them but will still not allow crypto exchanges banking privileges.
This has made it difficult for many businesses that are associated with crypto. For example, the NKB Group, a trading firm associated with blockchain investment, is still finding it hard to get bank partners. With banks being overly cautious, crypto businesses are facing a large hurdle.