Crypto businesses, particularly the smaller ones, are facing the ongoing problem of banks refusing to open accounts for them, a March 3, 2019 report says.
While large financial institutions like Julius Baer and JP Morgan have jumped head-first into the crypto market, it seems companies in the same space are struggling to accomplish one of the most basic tasks for modern businesses: Opening a bank account.
A March 3, 2019 report from Bloomberg reveals that many business owners of blockchain and cryptocurrency-focused companies are having a hard time getting local banks to open business accounts for them.
Entrepreneurs from the United States and Europe report similar treatment from local banks, with some of the establishments including HSBC Holdings Plc and, ironically, JPMorgan Chase & Co.
Why the Suspicions?
As the report pointed out, some of these issues can be boiled down to the fact that cryptocurrency is still a new and emerging industry and thus, there is less trust from financial institutions towards it. Another industry that was reported to have been struggling with the same issue was the nascent cannabis industry.
Some of these suspicions are based on genuine reasons according to 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. According to Houben, for every legitimate entrepreneur in the crypto industry, there are many that merely want to use it as a front to evade taxes or scam people.
Another contributing factor is the public attention that cryptocurrency has received for being involved in crime, such as the Silk Road incident in 2013 and also its use for bribery and kidnapping purposes.
While there are many legitimate reasons for a crypto firm to open a bank account, it is a much easier task for banks to issue a blanket ban on the industry than sort on a case-by-case basis.
There is also the cost issue for banks. The law requires that banks be sure of the identity of those they give accounts to and some might feel that it isn’t worth the cost to set up compliance systems.
Regardless, these practices do nothing for the growth of the industry and only serve to perpetuate the idea of the crypto industry being shady.
“Denying basic banking is madness, impedes sector growth and forces companies to get creative to solve the problem,” said Ben Sebley, the Head of Brokerage at NKB Group. “The banks are being overly prudent.”