Crypto companies need bank accounts to operate. They need to receive fiat deposits from customers, pay employees and vendors, and manage corporate funds. But many banks are reluctant to serve crypto clients. The regulatory uncertainty, compliance costs, and reputational risk associated with crypto make it an unattractive customer segment for most banks.
The debanking problem has been a persistent challenge for the crypto industry. Exchanges, OTC desks, and crypto-focused businesses frequently report having bank accounts closed without explanation or being unable to open new accounts. This creates operational risk, since a company that loses its banking relationship may be unable to process customer deposits and withdrawals until it finds a new banking partner.
The collapse of several crypto-friendly banks in 2023, including Silvergate Bank and Signature Bank, demonstrated how concentrated crypto banking relationships had become. These banks had positioned themselves as primary banking partners for the crypto industry, attracting large deposits from crypto companies. When crypto market conditions deteriorated and regulatory scrutiny increased, the banks faced deposit flight and ultimately failed.
The Banking for All Act and related proposals aim to prevent regulators from pressuring banks to deny services to legal businesses based on their industry. However, banks also make commercial decisions about which clients are worth the compliance costs. Serving a crypto exchange requires robust transaction monitoring, BSA/AML compliance, and regulatory scrutiny that many banks prefer to avoid by simply not taking crypto clients.
For crypto exchanges, banking relationships affect the products they can offer. An exchange with strong banking relationships can offer seamless fiat on-ramps, instant deposits, and efficient withdrawals. An exchange with weak banking relationships might only support crypto-to-crypto trading or use third-party payment processors that add cost and friction. The quality of banking relationships is a competitive advantage that is not always visible to users.
Stablecoin issuers are particularly dependent on banking relationships. USDC issuer Circle needs banking partners to hold the reserves backing USDC. When Silicon Valley Bank failed in March 2023, Circle had $3.3 billion in USDC reserves at the bank, temporarily causing USDC to depeg. This event highlighted how stablecoin stability depends on the stability of their banking partners.
International banking networks add complexity. Cross-border fiat transfers for crypto businesses often require correspondent banking relationships, where one bank routes transactions through another to reach the destination. These correspondent banks may have their own policies about crypto-related transactions, creating additional points of potential failure in the payment chain.
EMIs (Electronic Money Institutions) and payment service providers have partially filled the gap left by traditional banks. Companies like BCB Group, Seba Bank, and Sygnum Bank specialize in serving crypto clients. These specialized providers understand crypto compliance requirements and are willing to invest in the necessary monitoring infrastructure. However, they are smaller and may lack the full range of services that larger banks offer.
For individual traders, the banking fragility primarily manifests as withdrawal delays, limited fiat options, and occasional disruptions when an exchange loses a banking partner. Maintaining accounts at multiple exchanges reduces the impact of any single exchange banking disruption. Being aware that fiat on-ramps and off-ramps are dependent on banking relationships that can change without notice is a practical risk factor worth considering in your planning.