Original authors: Erin Griffith, David Yaffe-Bellany, The New York Times
Original translation: Luffy, Foresight News
At the beginning of last year, Ryne Saxe grew weary of handling demands from banks working with his San Francisco startup, Eco. These banks listed a series of new compliance and reporting requirements that Eco had to adhere to.
What was the issue? Eco is a cryptocurrency company operating in an industry under strict scrutiny from regulators. The banks stated that they were under pressure from government agencies to comply with new guidelines regarding cryptocurrency clients. Saxe said that Eco's payroll service provider, Bill.com, subsequently canceled the company's account citing the new policies.
Ryne Saxe, founder of the San Francisco cryptocurrency company Eco, wearing a sweatshirt and baseball cap, with a building in the background. Banks have required Eco to comply with a series of new compliance and reporting requirements.
After enduring eight months of pressure, Saxe decided to shut down Eco's app and change his business plan to no longer rely on partnerships with banks. Eventually, Bill.com restored his account.
"It felt like being in hell," Saxe said, "Our banking services were gradually diminishing."
For years, cryptocurrency startups like Eco have struggled to open and maintain bank accounts in the U.S., leading many entrepreneurs to cry foul. They angrily accused the government on social media of orchestrating a crackdown on the cryptocurrency industry, claiming the crackdown was unconstitutional and against the American spirit. They sued banking regulators and brought the issue to the attention of lawmakers.
This discontent has now reached a boiling point. Last month, influential venture capitalist and Andreessen Horowitz (a16z) founder Marc Andreessen mentioned the issue on Joe Rogan's podcast, which has over 10 million listeners. Andreessen accused the Democrats of "intimidating" cryptocurrency startups by pressuring banks not to work with them. These concerns were further amplified by cryptocurrency industry executives such as Elon Musk, Coinbase CEO Brian Armstrong, and Gemini co-founder Tyler Winklevoss. Tyler Winklevoss stated that the government and banks were "doing evil."
Brian Armstrong stands in an office with glass partitions and potted plants, resting his chin on his hand, looking to the side.
Complaints about "debanking" sometimes overlook key context or exaggerate the impact on startups. However, cryptocurrency executives have turned this issue into a political weapon at a critical moment in the industry's development.
Under the leadership of newly elected President Donald Trump, a vocal Bitcoin enthusiast, the cryptocurrency industry anticipated a shift in policy that could create a more lenient regulatory environment for cryptocurrency companies. Last week, Trump appointed cryptocurrency supporter and venture capitalist David Sacks as his "White House AI and Cryptocurrency Czar."
Executives in the cryptocurrency industry have begun urging Trump and Sacks to make personnel selections and implement policies to elevate the status of the cryptocurrency industry in the U.S. Stopping the banking system from cracking down on cryptocurrency startups is one of their top priorities.
No one has specifically tracked how many cryptocurrency companies are unable to obtain or retain bank accounts, but a16z founder Andreessen stated that this issue has affected 30 tech founders supported by his firm. (The firm's portfolio includes over 100 cryptocurrency startups.)
Last year, three top financial regulatory agencies sent letters to banking institutions warning them to exercise caution when dealing with cryptocurrency companies. Nic Carter, founder of cryptocurrency investment firm Castle Island Ventures, has written extensively about debanking, referring to the government's and banks' actions as "Operation Choke Point 2.0." (Note: Operation Choke Point refers to a law enforcement initiative launched by the U.S. Department of Justice during the Obama administration in 2013 aimed at targeting businesses suspected of fraud and money laundering, but in practice, it affected many innocent merchants.)
Marc Andreessen is sitting and speaking, gesturing with his hands, wearing a headset microphone.
Austin Campbell, a part-time business professor at New York University who has consulted for cryptocurrency companies, stated that the consequences of this behavior are "devastating for businesses."
Despite this, many cryptocurrency companies that lost their bank accounts managed to open new ones. Regulatory warnings indicate that banks are "neither prohibited nor prevented" from providing services to any specific category of clients, and many banks may have valid reasons for abandoning cryptocurrency clients. The cryptocurrency industry has a significant record of scams, fraud, and high-risk financial behaviors that harm consumers, leading to endless lawsuits and criminal prosecutions.
Cornell University economist Eswar Prasad stated, "Providing services to cryptocurrency companies exposes traditional commercial banks to reputational, regulatory, and financial risks. Banks are generally reluctant to accept clients like cryptocurrency companies with questionable financial status."
A spokesperson for financial operations platform Bill.com declined to comment on Eco's situation, stating that the company would notify any clients violating its service policies. A representative from a regulatory agency overseeing the banking industry (the Office of the Comptroller of the Currency) stated that the agency did not instruct any banks to "open, close, or retain personal accounts."
Fifteen years ago, pioneers of cryptocurrency were not interested in working with banks. They aimed to create a new type of currency that did not require banks or other intermediaries to store funds and process transactions. This technology was supposed to provide a refuge for those who struggled to access traditional banking services.
However, as cryptocurrency evolved into a trillion-dollar industry, cryptocurrency companies increasingly relied on existing financial infrastructure. They need bank accounts to pay employee salaries, receive funding from venture capital firms, and convert cryptocurrency into dollars.
Even before regulators began cracking down, the role of cryptocurrency in illegal financial activities, from drug trafficking to ransomware payments, raised suspicions among banks. Megan Knab, a tech professional in New York, became interested in cryptocurrency in 2017 and linked her digital wallet on the cryptocurrency exchange Gemini to her account at a major bank. She said that shortly thereafter, she received an email with just one sentence stating that her bank account had been closed.
"I had to go to a physical bank branch to withdraw cash to get my balance out," Ms. Knab said.
Sadie Raney, CEO of the cryptocurrency hedge fund Strix Leviathan, stated that when she first attempted to pay her employees in 2017, her payroll service provider Xero abruptly blocked the payment without warning. She said the company told her they had a blanket ban on business related to cryptocurrency companies.
"This has been a nightmare," Raney said. (A spokesperson for Xero stated that the company could not comment on individual cases but still has "cryptocurrency-related" clients.)
Ultimately, cryptocurrency companies turned to a small number of banks eager to work with the industry. The most notable was Silicon Valley Bank, which specialized in serving tech startups. Signature Bank and Silvergate Bank were also favored by cryptocurrency companies.
However, in 2022, the collapse of the FTX cryptocurrency exchange put pressure on the banking industry to stop working with cryptocurrency companies, as the government began cracking down on cryptocurrency, forcing some crypto startups to leave the U.S. Shortly after FTX's collapse, federal banking agencies and the White House issued guidance encouraging banks to "separate high-risk digital assets from the banking system."
Katie Haun, founder of cryptocurrency investment firm Haun Ventures, commented on this guidance, saying, "The guidance is too broad and vague. One bank told one of our portfolio companies, 'This business is not worth the risk to us.'"
Two months later, Silicon Valley Bank collapsed, triggering a nationwide banking crisis. Subsequently, Silvergate and Signature also went bankrupt.
During the week of Silicon Valley Bank's collapse, Konstantin Richter, CEO of cryptocurrency company Blockdaemon, found himself in crisis as well. He said that three-quarters of his company's assets were held at this bank, and he needed to find another place to store them. He planned to transfer the funds to a separate account at Bank of America.
Then he received a call from Bank of America: the bank would close Blockdaemon's account but did not provide sufficient explanation.
"I felt violated," he recalled, "It felt very unfair." (The bank declined to comment.)
After the ownership change at Silicon Valley Bank, Richter ultimately transferred all of the company's funds to Silicon Valley Bank. However, the risk of relying on a single bank may be greater than spreading assets across multiple institutions.
Richter said the significance of cryptocurrency "lies in providing banking services to those without bank accounts, and then suddenly you have no bank account."
Many cryptocurrency entrepreneurs who lost their bank accounts found backup accounts, while others were forced to leave the U.S. in search of stable banking relationships or resorted to temporary and unreliable solutions, conducting business using cryptocurrency and offshore debit cards.
However, a glimmer of hope has appeared at the end of the tunnel. Since Trump won the election last month, the cryptocurrency industry has been on the rise. This month, the price of Bitcoin even soared above $100,000, a long-awaited milestone.
Venture capitalist Nic Carter stated that he has discussed the past issue of debanking with lawmakers and hopes to protect the rights of cryptocurrency companies through legislation. French Hill, a Republican congressman from Arkansas and a member of the House Financial Services Committee, has called for Congress to investigate how banking regulators handle cryptocurrency companies.
The talking points of the cryptocurrency industry are now widely adopted in Washington. With the Republicans controlling Congress, Hill wrote on social media this month, "We will be able to stop, reverse, and investigate 'Operation Choke Point 2.0'."
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