Cryptocurrency startups face debanking challenges amid regulatory pressure
According to Cointelegraph, debanking has become a serious problem for crypto firms, especially affecting small projects that lack substantial financial and legal resources. Mauricio di Bartolomeo, co-founder of Ledn, suggested several cost-effective strategies for small crypto startups to address debanking issues while maintaining necessary compliance to build relationships with financial institutions.
Bartolomeo emphasized the importance of seeking affordable legal advice from law firms offering special rates for startups. He also suggested that small firms consider partnering with banks in other countries or operating within cryptocurrency structures until they can establish traditional banking relationships. Highlighting the critical nature of compliance, Bartolomeo stated: "First, do not skimp on compliance. The moment you skimp on compliance, you debank yourself. So do not cut corners on anti-money laundering (AML) regulations or know your customer (KYC) compliance."
Ledn, like many other crypto firms, faced debanking during the Chokepoint 2.0 operation. However, the company managed to weather the situation due to its diversified banking partnerships, allowing it to focus on regulatory compliance and avoid unnecessary scrutiny from regulators. In 2020, Ledn received a debanking notice, highlighting the difficulties faced by crypto firms in maintaining banking relationships.
In November, industry leaders expressed their concerns regarding the Chokepoint operation, and cryptocurrency executives shared their debanking experiences on social media. Venture capitalist Marc Andreessen highlighted this issue in an episode of The Joe Rogan Podcast, stating that over 30 founders of tech companies were debanked during the operation. He also blamed the Biden administration for stifling innovation in AI, warning institutional investors against new AI startups.
Court documents released in response to the Freedom of Information Act (FOIA) request showed that the Federal Deposit Insurance Corporation (FDIC) asked some banks to cease cryptocurrency activities in 2022. Heavily redacted FDIC documentation faced criticism from Judge Ana Reyes, who ordered the agency to provide clearer documents by January 2025. Moreover, it was reported that the FDIC pressured banks serving cryptocurrency clients to stop operations. Venture capitalist Nic Carter claimed that the FDIC under the Biden administration intentionally targeted Silvergate Bank to eliminate its cryptocurrency clientele despite the bank's solvency at the time of liquidation. Carter also claimed that the FDIC forced the bank to limit cryptocurrency deposits to 15%.
