Crypto Firms Are Reportedly Banking Through Intermediaries

Some cryptocurrency firms are reportedly doing their banking through intermediaries.

With a growing number of banks becoming hesitant to work with crypto clients, there is demand for middlemen who will do their banking for them, The Wall Street Journal (WSJ) reported Thursday (May 4).

The intermediaries store their crypto clients’ cash in their own bank accounts or work with banking partners to arrange accounts in the names of their clients, according to the report.

They also help their clients arrange to have accounts at multiple banks in case one fails, or one nation’s regulators crack down on the practice, the report said.

The reluctance of many banks to work with crypto clients — and the subsequent need for intermediary companies — has been driven by recent warnings from regulators, the failures of two banks that served the crypto sector and the volatility of digital assets, per the report.

Some banks that are not willing to work with crypto clients directly will work with the intermediaries because they believe that provides additional due diligence, the report said.

Banks willing to service crypto firms were flooded with applications in the weeks after the implosions of two banks once known for courting the crypto sector — Silvergate Bank and Signature Bank.

While many banks were wary about getting involved with crypto companies, others began to welcome crypto clients who had been left bankless after the downfall of their previous lenders.

In January — two months before the bank failures — three United States agencies said that banks must be wary of the risks of crypto assets.

In a joint statement released Jan. 3, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) said that while banks are not prohibited or discouraged from providing banking services as permitted by law or regulation, the agencies are assessing how crypto-related activities can be conducted.

“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” a statement said.

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