United Texas Bank, a Dallas-based lender and one of the few remaining banks in the US still serving cryptocurrency firms has come under fire from the Federal Reserve.
On Wednesday, the Fed issued a cease-and-desist order against the bank, citing significant deficiencies in its compliance with anti-money laundering (AML) laws about its crypto dealings.
The Fed’s notice did not provide specific details on how United Texas Bank failed to adhere to AML regulations. However, the order revealed that the bank’s leadership agreed to the terms rather than face formal proceedings.
The bank now has 90 days to develop a five-pronged action plan to ensure full compliance with AML standards.
Fed’s Targeting Crypto-Friendly Banks
This is the most recent in a string of enforcement actions directed at US institutions that support cryptocurrency. United Texas Bank is one of the few domestic banks remaining open to working with the cryptocurrency industry, with approximately 75 employees and $1 million in total assets. Crypto companies in the US are finding it more difficult to locate banks that can meet their needs as regulators tighten.
Recently, the Federal Reserve has adopted a strict stance towards banks that trade in cryptocurrencies. Similar scrutiny was applied to Pennsylvania-based Customers Bank last month when the Fed put it under strict surveillance.
Customers Bank, well-known as the preferred bank for numerous cryptocurrency companies, filled the void left by the failure of Signature and Silvergate banks in 2023. Many crypto enterprises are having difficulty finding new banking partners as a result of the closure of these two significant players in the crypto banking market.
Businesses Face Difficult Time with Fiding Banks Dealing with Crypto
As the list of US banks willing to work with crypto firms grows shorter, many companies have been forced to consolidate their banking relationships with the few remaining lenders willing to take them on. Others have resorted to moving their operations offshore to access financial services.
In its comments, the Federal Deposit Insurance Corporation (FDIC) cautioned that deposits made with bitcoin companies are subject to volatility. They contend that banks that serve cryptocurrency clients may face serious liquidity issues as a result of this volatility. Even formerly pro-crypto banks have been pressured by these worries to lessen their involvement in the industry.
Politicians Chips In Ahead of Elections
Politicians have taken notice of the crackdown on cryptocurrency banking. In an interview with Yahoo Finance, former Republican presidential candidate Vivek Ramaswamy recently criticised the present regulatory approach to cryptocurrencies.
He maintained that the US government’s “regulation by enforcement” approach is detrimental to the sector and devoid of the clarity required for ethical corporate practices. Ramaswamy claimed that the current regulatory environment’s uncertainty is harmful and demanded clearer guidelines.
“That’s not how this country is supposed to work,” Ramaswamy told Yahoo Finance. “Whether it’s crypto or financial services more broadly, we deserve greater clarity rather than ambiguity. Ambiguity is the friend of the tyrant.”
US cryptocurrency enterprises may encounter even more difficulties obtaining trustworthy banking relationships if the Federal Reserve and other regulatory agencies tighten their restrictions on banking related to cryptocurrencies.