Crypto’s Access to Banking Services: Consensus 2021 Recap
A cryptocurrency (or crypto currency) is a digital asset des... More is revolutionizing traditional finance. Bringing his expertise in cryptocurrency and A blockchain—the technology underlying bitcoin and other c... More security to the Consensus is a mechanism, usually used by most nodes on the ... More 2021 virtual conference, CipherTrace CEO Dave Jevans was joined by Hailey Lennon (attorney at Anderson Kill, formerly at Silvergate) and Michael Kimani (creator at Cryptobaraza) for a lively discussion on “Crypto’s Thorn in the Flesh: Access to Banking Services.”
The Revolution of Banking and Crypto
The intersection of cryptocurrency and traditional finance has been widely adopted over the last year: JP Morgan has taken on two prominent cryptocurrency exchanges as banking customers, PayPal began accepting cryptocurrency transactions on its network, and Anchorage became the first national bank for digital assets when it received a conditional trust charter from the OCC. However, while some banks have embraced virtual assets based on the many benefits and enormous revenue potential they bring, many continue to shy away from crypto even as the blockchain economy booms.
However, like it or not, cryptocurrency has become pervasive in the global financial system. In the past two years, as more mainstream consumer and institutional investors embrace cryptocurrencies, it becomes increasingly difficult, if not impossible, for traditional financial service firms to avoid entanglements with the crypto economy.
Highlights from the Crypto Neo-Banking Panel
The panel at Consensus 2021 offered perspectives from each expert on how to better integrate crypto into the traditional banking system, as well as the potential consequences of continuing to ignore the sector. It’s 2021 and every financial institution on the planet is racing to figure out its Bitcoin is a digital currency (also called crypto-currency) ... More strategy. Yet, crypto companies and consumers are still persona non grata when it comes to basic banking services like opening a checking account or transferring funds. As adoption of cryptocurrencies grows, and consumers demand easier forms of payment, Financial Institutions need to find safe ways to work with crypto.
“Countries and banks can’t avoid working with crypto because consumers want it,” said attorney Hailey Lennon. “Everyone should be trying to learn more about how to safely regulate this space. Banks should focus on educating staff about crypto.”
Safe regulations of crypto exchanges has become a priority for financial institutions as they struggle to safely meet consumer demand.
“When I talk to our customers at large banks, I am frequently asked how they can safely bank with the quality cryptocurrency companies” Dave Jevans on the value of accurate intelligence and analytics for banking services – traditional and new.
“Teams like CipherTrace have been working with Financial Institutions for years to provide data for regulatory compliance to help banks accept quality customers. Regulators are working with consumers to make banking services safe for users.” noted Jevans.
Jevans closed the panel on a high note, clarifying that, “the good news is there are over 80 banks that are banking crypto companies. And I would say this—if you look at the really big [banks], while they say they don’t do it, many of them actually do if you’re a high-quality company.”
The Chilling Effect: The Risks of Not Using Crypto
When banks turn away viable virtual asset businesses there is a detrimental effect on the blockchain economy. Once rejected by banks, these businesses may risk forcing crypto firms to hide their transactions as well as the true nature of their businesses. In doing so, banks create multi-billion-dollar blind spots that prevent them from fully assessing and understanding their risk exposure. On the other hand, banks looking to actively onboard virtual asset customers or begin offering crypto custody services can fail to fully assess the risks that come with these services if using the wrong tools.
If you’re looking to understand what is needed to better integrate crypto into the traditional banking sector be sure to check out our blog on Best Practices for Monitoring Virtual Currency-Related Transactions at Your Bank.