Underbanked Crypto Industry Forced To Innovate Solutions
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Central banks around the world have been notably removed from all things blockchain, and are more than mildly averse to serving cryptocurrency-related businesses. While large banking conglomerates like JP Morgan Chase and Bank of America often cannot be reached for comment on the issue, the general consensus among banks who reject cryptocurrency is that the space is a regulatory “time bomb.”
That coupled with KYC (Know Your Customer) and AML (Anti Money Laundering) requirements, makes large banks hesitant to touch crypto.
Malta, a tax haven once dubbed “Blockchain Island” for its notably cryptocurrency friendly policies, reports that domestic crypto companies are being refused service by local banks. The cited reason for Maltese banks’ astringence toward cryptocurrency businesses: “risk aversion.”
Bloomberg compiled its own report on the hostility of big banks towards crypto. In it, the publication announced:
“The gatekeepers of mainstream commerce are keeping their doors shut to cryptocurrency companies.”
Without support from the financial industry, blockchain startups have found alternative ways to circumvent big banks. For instance, unable to secure banking services for his cryptocurrency exchange, Kraken CEO Jesse Powell tweeted that he “basically had to employ the arts of a money launderer to survive” by spreading funds across several banks and stuffing cash into safety deposit boxes.
Mark Lamb, CEO of Hong Kong-based cryptocurrency exchange CoinFLEX, has said that avoiding the entire blockchain space and dubbing cryptocurrencies high risk is “indefensible and protectionist.”
Furthermore, smaller banks like USA’s Signature Bank and Europe’s Bank Frick are serving cryptocurrency businesses, thereby filling the niche left empty by larger institutions.
By finding new or alternative solutions to manage their funds, cryptocurrency companies are doing exactly what blockchain technology was originally made for: declaring financial independence from large banks.
Mark Lamb’s solution was to utilize stable coins to conduct value transfer and payroll for his own business, and his words on the matter sum up the attitude of crypto companies to Wall Street: “I’m washing my hands of them and now avoid banking altogether.”
The author is invested in digital assets, but none were mentioned in this article