Banks Turn Away from Cryptocurrency Companies as Regulatory Crackdown Deepens

02/17/2023 07:32 • Metaverse Matters • 147 views

It is reported that some banks in the United States are moving away from cryptocurrency companies, because the crackdown by the United States regulatory authorities may separate the digital currency from the real world financial system. After the bankruptcy of FTX last year, regulators expressed concern about the relationship between banks and cryptocurrency customers. The United States Securities and Exchange Commission (SEC) is actively cracking down on the larger players in the industry or reducing their scope of influence. People familiar with the matter said that the move has alerted bankers who are unwilling to deal with customers targeted by the SEC. Now bankers are reassessing all their exposure to encryption, no matter how small. A few small banks in the encryption field are reducing their exposure to the market or completely cutting off their links with the market. Banks that keep a distance from cryptocurrencies are making greater efforts to stay away from this business, close accounts and avoid customers with potential connections to the industry. Without bank cooperation, cryptocurrency companies are difficult to pay employees’ wages, and it is also difficult for customers to deposit or transfer money into digital currency.

People familiar with the matter: Banks are going their separate ways with cryptocurrency under the regulatory crackdown

Interpret the above information:

The message highlights the growing reluctance of US banks to deal with cryptocurrency companies due to the increasing scrutiny by the regulatory authorities. Policymakers and regulators have been concerned about the lack of transparency, security, and protection for investors in the cryptocurrency industry. The recent bankruptcy of FTX has further raised red flags and prompted the United States Securities and Exchange Commission (SEC) to crack down on larger players and reduce their scope of influence.

As a result, banks are becoming cautious and distancing themselves from cryptocurrency companies, even small ones. Some are reducing their exposure to the market or cutting off their links completely. This shift is not only affecting the cryptocurrency companies’ ability to pay their employees but also making it difficult for customers to deposit or transfer money into digital currency.

Moreover, bankers are scrutinizing their exposure to encryption, even if it is minuscule. They are making every effort to disassociate themselves from the industry, closing accounts, and avoiding customers with potential connections to the industry. Bankers are understandably unwilling to take on the risk of dealing with customers who could attract the scrutiny of the SEC, as it could damage their reputation, invite penalties, and disrupt their operations.

The regulatory crackdown and the banks’ growing reluctance to deal with cryptocurrency companies represent a major challenge for the industry’s growth and stability. Without banks’ cooperation, cryptocurrency companies will struggle to survive, and their already-volatile market could become even more erratic.

In conclusion, the regulatory and banking landscape for cryptocurrency companies is becoming more hostile and uncertain, which could spell trouble for their future. While some see the SEC’s crackdown as necessary to protect investors and prevent fraud, others argue that it is stifling innovation and growth. The next few years could be crucial in determining the fate of the cryptocurrency industry in the US and beyond.

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