Founder of Uniswap, Hayden Adams, recently had his account closed by JP Morgan Chase. In a tweet, Adams stated that the financial institution had done so without giving notice or explanation for their actions. Adams’ tweet also showed his empathy for other companies and individuals in the crypto industry that have experienced a similar fate.
🤡 This week @jpmorgan @Chase closed my bank accounts with no notice or explanation
🧑💻 I know many individuals and companies who have been similarly targeted simply for working in the crypto industry
🚀 Thanks for making it a personal
— hayden.eth 🦄 (@haydenzadams) January 23, 2022
De-banking of Crypto
The move by JP Morgan isn’t surprising considering several businesses offering crypto-related services having been de-banked with no reason late last year and in the first weeks of January this year. If you’re not familiar with what de-banking is, it is what financial institutions such as banks are using to terminate or deny services to particular clients. In this case, the clients are individuals and businesses in the crypto industry.
The law allows financial institutions to deny or terminate services to customers. However, they need to state their reason for doing so. For example, financial institutions can terminate services to a customer that is engaged in making illegal transactions such as money laundering. The bank is however required to report this to financial authorities. Failure to do so would result in the bank being liable for fines of up to $31.4 million AUD.
Lack of transparency
Some banks claim that the de-banking of crypto accounts is to avoid risk. However, cryptocurrencies aren’t illegal. In fact, businesses and individuals in the crypto industry are already subject to various regulations aimed at minimising risk.
A response to the tweet by Brian Quintez, former commissioner of the Commodity Futures Trading Commission (CFTC), sheds some light on the latest wave of de-banking of crypto businesses. According to Quintez, the de-banking is most likely a direction from the top i.e. The Office of the Comptroller of the Currency (USOCC) or the Federal Reserve. Banks would have to end their relationship with a customer when they receive direction from the examiner stating that the customer was too risky. Banks are contractually prevented from giving the customer notice or providing them with a reason for the termination of services.
The closing of Hayden’s account also raises questions as to JPMorgan’s stance in regards to crypto. The financial institution showed enthusiasm and support for cryptocurrency stating that Bitcoin in particular would see tremendous growth in the future.
Can’t beat them, join them
In Australia, the war between banks and the crypto industry has been raging for quite some time. The move to de-bank several crypto companies in the latter part of last year has led many to believe that it is purely malicious on the part of banks in Australia. Many believe that it is purely motivated by the fear of competition that cryptocurrencies offer against traditional financial institutions. However, following the warning by Aussie regulators, some banks are changing their tune and now joining the crypto industry. However, this doesn’t solve the problem. Regulators in Australia, recommend having regulations specific to crypto in order to tackle key issues. It’s now a game of wait and see.