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Financial giants including JP Morgan, HSBC closing down bank accounts of cryptocurrency companies to hinder adoption, finds report

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Financial giants including JP Morgan, HSBC closing down bank accounts of cryptocurrency companies to hinder adoption, finds report
Source: Pixabay

Companies operating in the decentralized cryptocurrency space have often been at loggerheads with their traditional counterparts. Large financial institutions, which control systems that facilitate monetary deposits and withdrawals, see cryptocurrency newbies as ‘disruptors’ and some have even shown these crypto-companies the door, preventing them from using their banking services.

According to a report by Bloomberg, crypto-companies have often been “refused banking services” by top financial giants like HSBC Holdings Plc and JP Morgan Chase & Co.

Traditional financial institutions have been wary of the cryptocurrency community since it emerged over a decade ago, with several top-financiers labeling the market a “scam” and a “delusion”.

Despite the cryptocurrency industry wanting a laissez-faire regulatory system, some want the government to step-in, bringing in limited, but necessary guidelines so that frauds and manipulations do not materialize. This was attested to by Robby Houben, a Professor at the University of Antwerp, who also co-authored a paper on crypto-related financial crime and presented it before the European Parliament.

Despite Bitcoin [BTC] coming a long way since its Silk Road days, a one-size-fits-all ban is being implemented by big banks to keep out crypto-companies.

Sam Bankman-Fried, Chief Executive Officer of Alameda Research, a digital-assets trading firm in California said,

“The standard answer of `just go to your local Chase branch’ doesn’t work in crypto. It’s not illegal for big banks to bank the crypto industry, but it’s a massive compliance headache that they don’t want to put the resources in to solve.”

Top cryptocurrency exchanges were also affected by this ‘shuttering’. Among them, Kraken saw its bank accounts with JP Morgan Chase and Bank of America Corp being closed on short notice. Jesse Powell, the exchange’s CEO, went on to claim that he had to “employ the arts of a money launderer” to stay afloat.

Some crypto-proponents are however, looking at the problem as an opportunity for further adoption, moving away from the traditional banking-and-fiat sector. In fact, salaries in many cryptocurrency companies are done via digital assets, including fiat-backed stablecoins. Mark Lamb’s ConFLEX, a cryptocurrency derivatives exchange in Hong Kong is one such example.

Lamb stated,

“The banking system has never been friendly to crypto, and while maybe that made some sense in the early days, continuing to label all crypto businesses as high-risk is indefensible and protectionist. I’m washing my hands of them and now avoid banking altogether.”

In light of this clash, cryptocurrency companies are vying for better banking relationships to strengthen their financial base.

Ben Sebley, the Head of Brokerage at NKB Group summed up the debacle, stating,

“Denying basic banking is madness, impedes sector growth and forces companies to get creative to solve the problem.”

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