One of the most searched combinations on Google is “opening bank accounts for cryptocurrency” and “crypto bank account” with over 139 and 167 million results respectively. Despite the growing demand, the relationship between traditional banks and cryptocurrency business remains taboo. It is often portrayed by the media and regulators as two incompatible worlds because from the smallest start-ups to the biggest digital asset exchange platforms, they all repeatedly encounter the issue of opening and managing a traditional bank account, whether it’s with an off-shore banking provider or a well-known multi-national organisation.
With such a complex legal and regulatory area with jurisdictional specificities, our blockchain and cryptocurrency specialists Mariya Lazarova and Allan Murray explore some of the reasons behind the antagonistic nature of the relationship between cryptocurrency businesses and banks, share tips on overcoming banking difficulties, and cover recent developments of the issue in this article.
Banks vs Crypto
Banks have naturally shied away from providing services and opening bank accounts for crypto-dealing businesses and there are a few reasons for this:
Underpinning all these reasons though is a basic failure by banks to really understand this very specific sub-type of customer, who they are, how they operate and what their business needs are.
Responding to the opposition
Not all banks are the same and some will be friendlier than others. There are some practical steps that can be taken when thinking about opening a bank account as a business or a person dealing with cryptocurrencies and digital assets:
Are things changing?
The current situation is to some extent a vicious circle: crypto businesses want to grow and move forward but if they are denied basic banking rights, this can then result in creative and not always successful attempts to overcome the restrictions they face, which then lowers those businesses’ reputations, which means that they continue to be denied basic banking access and so on. But there are projects underway deliberately addressing this state of affairs, such as Knabu, who are building a fiat clearing bank for the crypto community.
But a global shift in attitude from restriction and stigma to flexibility and appreciation needs to happen for the sector to thrive. Recently there have been some positive changes: in May 2020, Coinbase and Gemini were added to the list of clients at JPMorgan Chase. At the end of June 2020, ING became the first bank to have taken part in developing a protocol (the “TRP”) for tracking crypto transactions, which is compatible with FATF standards. ING’s protocol has also been backed by Standard Chartered Bank.
The way forward
Banking difficulties not only suffocate the growth of crypto and financial institutions alike but they also slow down and disincentivize the development of an adequate regulatory regime. The more banks welcome lawful crypto clients, the higher and clearer relevant security and regulatory standards will become, turning a vicious circle into a virtuous one. Serving the banking needs of the crypto-sphere is a field of growing opportunities, and those institutions who are willing to explore it now may benefit the most among their peers in the long-term.
If you require legal assistance, contentious and/or transactional, in the field of blockchain, cryptocurrencies and digital assets, please contact our Senior Associate Allan Murray via email on firstname.lastname@example.org or our Trainee Solicitor Mariya Lazarova at email@example.com.