The cryptocurrency sector is pushing for a reset with the banking industry following years of strained relations and regulatory crackdowns.
What Happened: The collapse of key industry players like FTX in 2022 and subsequent bank account closures left many crypto companies and founders struggling to secure financial partnerships.
However, the recent election of Donald Trump has renewed optimism, with his administration signaling a potentially friendlier stance toward crypto.
Despite surging cryptocurrency prices and Trump's promise to establish a national Bitcoin reserve and a regulatory council, U.S. banks remain hesitant to engage with the crypto sector.
Industry insiders report continued account closures and difficulties establishing banking relationships, according to The Wall Street Journal.
Nic Carter, a founding partner at Castle Island Ventures, shared that every U.S.-based firm in his portfolio has faced banking challenges.
"Banking crypto is still a poisoned chalice today," Carter said.
"They do not want the Eye of Sauron descending upon them," he added, referencing the omnipresent antagonist from The Lord of the Rings.
Castle Island itself faced hurdles finding a banking partner, and when they did, the institution urged discretion to avoid regulatory scrutiny.
Crypto proponents argue that federal regulators effectively targeted the industry in 2022 by pressuring banks to sever ties with crypto businesses.
Official guidance from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency categorized crypto clients as higher-risk, discouraging banks from engaging with them.
Similar practices have been observed in other controversial industries like firearms and cannabis.
This crackdown has drawn attention from Congress. The House Financial Services and Senate Banking committees are now probing the issue of restricted banking access.
"Legal businesses in the United States…should have the freedom to bank and have financial services," said Rep. French Hill, a Republican from Arkansas.
Caitlin Long, CEO of Custodia Bank, briefed about 30 congressional staffers on her experience of being denied banking access. Representatives from the firearms industry also participated, highlighting broader concerns about banking fairness.
David Sacks, recently appointed as the White House crypto czar, acknowledged the issue on X, stating it "needs to be looked at."
Trump allies, including Marc Andreessen and Elon Musk, have amplified these concerns.
Andreessen recently told Joe Rogan's podcast that dozens of tech founders, many in crypto, have had their accounts shuttered by major banks. Musk shared similar accounts on social media.
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Why It Matters: This attention has sparked a broader conversation about the intersection of crypto and traditional banking.
Banks remain cautious, citing the volatility and fraud risks associated with cryptocurrency.
Nonetheless, some industry observers believe regulatory changes could open doors.
While some in the crypto community acknowledge the need for better reputation management, others point to the broader potential of cryptocurrency to address financial system inefficiencies.
Alex Gladstein of the Human Rights Foundation emphasized the importance of Bitcoin for activists facing financial censorship, but also noted the need to address scams and fraud in the sector.
"There needs to be nuance in the conversation," Gladstein said.
Bankers have suggested that clear guidance from regulators could encourage a more open stance toward crypto clients.
For now, the sector waits to see whether the Trump administration's promises will translate into meaningful change.
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