United Texas Bank, one of the few remaining banks in the U.S. still catering to cryptocurrency companies, is now facing the wrath of the Federal Reserve.
The central bank has slapped it with a cease-and-desist order, citing “significant deficiencies” in the bank’s anti-money laundering (AML) practices, specifically relating to its crypto customers.
According to the notice, the Fed has given United Texas Bank 90 days to come up with a comprehensive plan addressing five key areas to ensure it meets AML compliance standards.
What exactly the bank did wrong isn’t detailed in the order, but the leadership at United Texas Bank has agreed to comply without pushing back. The bank has around 75 employees and holds about $1 million in total assets.
United Texas Bank isn’t alone, though. Just last month, Customers Bank, another lender with a history of working with crypto firms, caught the attention of U.S. authorities.
It agreed to strict oversight from the Federal Reserve due to its dealings with crypto companies. Customers Bank had stepped into the gap left when Signature and Silvergate, two major banks serving the crypto industry, shut down in 2023.
With these closures, many crypto businesses were left scrambling to find new banking partners. Customers Bank quickly became a go-to option, being dubbed the “new favorite” by some in the industry.
But now, it too is facing intense scrutiny from regulators. To comply, the bank must now notify the Federal Reserve 30 days in advance before launching any new crypto-related product, service, or partnership.
Many companies have either consolidated their banking relationships with the few remaining willing lenders or have looked offshore to continue their operations.
The Federal Deposit Insurance Corporation (FDIC) has previously shared concerns that deposits from crypto companies pose some pretty major liquidity risks and could lead to instability for banks that serve them.
Back in 2022, it reported that Signature Bank’s management did not effectively address the risks associated with its high concentration of deposits from the crypto market, which represented over 20% of everything. The bank’s crypto-related deposits fell by $8 billion.
The Department of Justice launched an investigation into the business activities between Signature and its crypto clients just prior to the bank being seized by regulators.
Meanwhile, Silvergate’s deposits fell from $12 billion in the third quarter of 2022 to $3.8 billion by December 2022. The bank’s share price fell 89% from its November 2021 all-time low of $25.
