Original authors: Erin Griffith, David Yaffe-Bellany, The New York Times
Original text translated by: Luffy, Foresight News
At the beginning of last year, Ryne Saxe grew weary of dealing with the demands from banks working with his startup Eco in San Francisco. These banks listed a series of new compliance and reporting requirements that Eco had to adhere to.
What is the issue? Eco is a cryptocurrency company in an industry under strict scrutiny by regulators. Banks state that they are under pressure from government agencies to comply with new guidelines regarding cryptocurrency clients. Saxe stated that Eco's payroll service provider Bill.com subsequently canceled the company's account citing the new policy.
Ryne Saxe, founder of cryptocurrency company Eco in San Francisco, wearing a sweatshirt and baseball cap, stands in front of a building. The bank has demanded that Eco 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 alter his business plan so that it no longer relied on banking partnerships. Ultimately, Bill.com restored his account.
"It's like being in hell," Saxe said, "our banking services are gradually dwindling."
For years, cryptocurrency startups like Eco have struggled to open and retain 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 this suppression is unconstitutional and contrary to the American spirit. They sued banking regulators and raised the issue with members of Congress.
This discontent has now reached a peak. Last month, influential venture capitalist Marc Andreessen, founder of Andreessen Horowitz (a16z), mentioned the issue on Joe Rogan's podcast, which has over 10 million listeners. Andreessen accused the Democrats of "bullying" cryptocurrency startups by pressuring banks not to work with them. These concerns were further amplified by industry executives like Elon Musk, Coinbase CEO Brian Armstrong, and Gemini co-founder Tyler Winklevoss. Tyler Winklevoss claimed that the government and banks are "doing harm."
Brian Armstrong stands in an office with glass partitions and potted plants, resting his chin on his hand, gazing to one side.
Complaints about "debanking" (referring to being excluded from banking services) sometimes overlook key context or exaggerate the impact on startups. However, cryptocurrency executives have turned this issue into a political weapon at an opportune time for the industry.
Under the leadership of newly elected President Donald Trump, a vocal Bitcoin enthusiast, the cryptocurrency industry is expected to see 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 crypto 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 counted how many cryptocurrency companies have been unable to access or retain bank accounts, but Andreessen, founder of venture capital firm a16z, 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 be cautious 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 which inadvertently impacted many innocent merchants.)
Marc Andreessen is sitting and talking, gesturing with his hands, wearing a headset.
Austin Campbell, an adjunct business professor at NYU who has consulted for cryptocurrency companies, stated that the result of this behavior is "devastating for businesses."
Nevertheless, many cryptocurrency companies that lost their bank accounts managed to open new ones. Regulatory warnings state that banks are "neither prohibited nor prevented" from servicing any particular category of customers, and many banks may have good reasons for abandoning cryptocurrency clients. The cryptocurrency industry has a significant record of scams, fraud, and high-risk financial behaviors that harm consumer interests and lead to incessant lawsuits and criminal prosecutions.
Cornell University economist Eswar Prasad stated, "Providing services to cryptocurrency companies poses risks to traditional commercial banks in terms of reputation, regulation, and financial operations. Banks are generally reluctant to accept financially questionable clients like cryptocurrency companies."
A spokesperson for financial operations platform Bill.com declined to comment on Eco's situation, stating that the company would notify any customers violating its service policies. A representative from a banking regulatory agency (the Office of the Comptroller of the Currency) stated that the agency did not instruct any bank 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 had difficulty accessing traditional banking services.
But as cryptocurrency has developed into a trillion-dollar industry, cryptocurrency companies have increasingly relied on existing financial infrastructure. They need bank accounts to pay employee salaries, receive funds from venture capital firms, and convert cryptocurrencies into dollars.
Long before regulators began cracking down, the role of cryptocurrencies in illegal financial sectors, from drug trafficking to ransom payments, had raised suspicions among banks. Megan Knab, a tech professional in New York, became interested in cryptocurrencies in 2017 and linked her digital wallet at the cryptocurrency exchange Gemini to her account at a major bank. She said that soon after, she received an email with just one sentence saying her bank account had been closed.
"I had to go to a physical bank branch to withdraw cash to take out my balance," Ms. Knab stated.
Sadie Raney, CEO of cryptocurrency hedge fund Strix Leviathan, stated that when she first tried to pay her employees in 2017, her payroll service provider Xero abruptly blocked the payment without warning. She said the company told me they had a blanket prohibition on business related to cryptocurrency companies.
"It has always 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 collaborate with the industry. Most notably, 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 cryptocurrencies, 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, stating, "This guidance is too broad and vague. One bank told one of our portfolio companies, 'This business is not worth the risk for us.'"
Two months later, Silicon Valley Bank collapsed, triggering a nationwide banking crisis. Subsequently, Silvergate and Signature also went bankrupt.
The week Silicon Valley Bank collapsed, Konstantin Richter, the head of cryptocurrency company Blockdaemon, also found himself in crisis. He said his company had three-quarters of its assets deposited in this bank and needed to find another place to store them. He planned to transfer funds to an independent 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 change of ownership at Silicon Valley Bank, Richter ultimately transferred all the company's funds to Silicon Valley Bank. However, the risk of relying on a single bank may be greater than the risk of 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 find yourself without a 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 resort to temporary and unreliable solutions, using cryptocurrencies and offshore debit cards to conduct business.
However, the dawn 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 to over $100,000, a milestone that many have long awaited.
Venture capitalist Nic Carter stated that he has discussed the past issues of banking with legislators 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, 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 Republican Party controlling Congress, Hill wrote on social media this month, "We will be able to stop, reverse, and investigate 'Operation Choke Point 2.0.'"