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Another Crypto-Friendly Bank Under Fire for AML Violations

Another Crypto-Friendly Bank Under Fire for AML Violations

DailyCoinDailyCoin2024/09/06 02:03
By:DailyCoin
  • Federal Reserve issues cease-and-desist order to United Texas Bank.
  • The bank faces scrutiny over AML practices with crypto firms. 
  • Regulatory scrutiny tightens on U.S. crypto-friendly banks.

Crypto firms have long struggled to access traditional banking services, which are still crucial for their operations. At the same time, crypto-friendly banks , often their only lifeline, face mounting regulatory pressures. 

One such bank, United Texas Bank, recently received a cease-and-desist order from the Federal Reserve . The move raised concerns about crypto’s ability to interact with the traditional banking sector.  

Crypto-Friendly United Texas Bank Faces Regulatory Action

The Federal Reserve, the central banking authority and chief banking regulator, is intensifying its crypto-friendly banks. On Wednesday, September 4, the Federal Reserve issued a cease-and-desist order to United Texas Bank. The regulator cited the anti-money laundering (AML) and Bank Secrecy Act (BSA) practices, particularly with its crypto customers. 

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The Fed’s order requires the United Texas Bank to develop a detailed action plan within 90 days to address these deficiencies. The bank must improve oversight, customer due diligence, and internal controls to ensure compliance with federal regulations. 

The order follows an examination that began in May 2023, revealing lapses in corporate governance and bank management oversight. The action is part of a broader regulatory crackdown at crypto-friendly banks, which the Fed considers risky. 

United Texas Bank’s Role in Supporting Crypto Firms

United Texas Bank, which has $1 million in assets and employs 75 people, is one of the few U.S. banks still actively banking crypto firms. Another crypto-friendly bank, Customers Bank, faced similar enforcement action earlier this month. 

Like United Texas Bank, Customers Bank stepped into the void left by the collapse of Silvergate in 2023. It was precisely this collapse that led to greater regulatory scrutiny over crypto-friendly banks. 

According to the Federal Deposit Insurance Corporation (FDIC), deposits from crypto companies can lead to volatile swings in a bank’s balance sheet. This can potentially create a liquidity crisis, which the Fed wants to avoid. 

This risk has made institutions weary of working with crypto firms, and many have exited the market entirely. This means that crypto companies have fewer banking options in the US, and many are starting to look offshore for partners. 

On the Flipside

  • Silvergate Bank’s downfall was tied to its heavy reliance on crypto deposits , which caused a classic bank run after FTX’s collapse in late 2022. 
  • Unlike Silvergate, Signature Bank closed in March 2023 due to regulatory concerns about the volatility of crypto-related deposits. The bank remained solvent at the time. 

Why This Matters

The enforcement actions against crypto-friendly banks signal an ongoing regulatory crackdown. This has the effect of limiting financial access for U.S. crypto businesses, slowing the industry’s growth. 

Read more about Signature Bank’s shutdown: 
“The Bank was Solvent”: Crypto-Friendly Signature Bank Unjustly Shutdown?

Read more about Nvidia’s effect on crypto: 
Crypto Market Tumbles as Nvidia Faces DOJ Antitrust Probe

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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