Financial Institutions to Avoid Crypto Due to AML Risks
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Banks do not want to handle crypto because of anti-money laundering (AML) risks. TD Cowen said banks will not support crypto without clear rules. They fear big fines if they allow illegal transactions.
Congress will discuss crypto banking issues this week. Lawmakers may review rules that make it hard for crypto companies to work with banks. Many crypto firms say banks refuse to serve them.
Banks Want Clear Rules Before Handling Crypto
TD Cowen said banks may store crypto safely if laws protect them. Without this, banks could face huge fines for failing to stop illegal activities. To this end, financial establishments may avoid digital assets because they fear AML risks.
It is important to note that the Office of the Comptroller of the Currency (OCC) might require banks to get approval before handling digital assets. According to TD Cowen, this would push banks further away, causing several digital assets businesses to struggle if banks refuse to support them.
Crypto Companies Struggle to Get Banking Services
Many cryptocurrency companies claim that banks are unwilling to collaborate with them. Regulators alerted banks to the dangers of cryptocurrency after FTX’s bankruptcy in 2022. Banks became even more cautious as a result.
Some believe the government is trying to cut digital assets from banking. In 2023, Nic Carter called this “Operation Choke Point 2.0.” Coinbase also sued the FDIC, claiming unfair treatment of digital assets firms. Many companies now face challenges getting bank accounts.
Banks Fear Risks of Stablecoins Payments
Stablecoins, which combine cryptocurrencies with conventional financing, are not something that banks are eager to create. They fear that they will be held accountable if criminals use stablecoins for illegal activities. Banks won’t take this chance if there are unclear regulations.
According to TD Cowen, this problem won’t go away anytime soon. Banks won’t trust cryptocurrency without more robust legal protections, even with new regulators. A major change in AML rules is needed before banks feel safe working with crypto.
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