So you are saying that a private company, i.e. the bank must service the crypto industry even though it is going to mean they will suffer massive losses in doing so?
See my explanation of why it is an extremely costly venture for banks.
My position is that banks (which are not "private companies" as normally understood, but heavily regulated entities whose status already involves a complex bundle of special rights and special obligations) should be obliged to provide basic banking to any legally operating individual or business, just as they are already obliged to offer various services that they probably would not if they had a free choice.
If they are unable to figure out a way to provide basic banking without extending credit in the way patio11 describes then this will of course be extremely costly for them, but I suspect they would figure out a way to not have to extend credit rather quickly (hint: look at what banks in virtually any other country do) if they actually tried. If not - i.e. if the current price of banking is only sustainable when banks are permitted to arbitrarily refuse service - then I guess prices will have to rise to something similar to what they are in countries where banks already have those kind of service obligations. Again, that doesn't sound like such a terrible fate.
Okay, now I understand, you know very little about banking. I started a bank so I will try to help.
Banks are mostly private companies (most are listed on stock exchanges) so public companies in that meaning, but in most cases they are not government owned. I was meaning private in the sense they are not public owned entities by the government.
Banks are highly regulated.
Regulations require banks to manage their risks mainly liquidity and capital risks plus operational risks.
There is no laws mandating banks must bank everyone and every business.
There are laws that mandate banks must not take on excessive risks.
Banking is a principle based regulation. This means the governments set laws based on guidelines of how banks meet the obligations.
Banks are managing their customers constantly and any customer that represents unmanageable risks mainly liquidity they must remove them from their balance sheets.
It is the crypto industry fault that they refuse to take the actions and accountability to work with the banks.
This doesn’t only happen in crypto.
Crypto is highly volatile and liquidity is unmanageable for banks. When I spoke to the regulators, we were told we had to hold 100% liquidity for deposits intended for crypto. There is zero ability to recover the losses of the liquidity obligations.
Like all businesses, banks have the right to refuse to service customers they don’t want to serve because the costs exceed the income.
On the flip side the crypto industry is refusing to accept the additional costs and refusing to derisk their platforms.
> It is the crypto industry fault that they refuse to take the actions and accountability to work with the banks.
Yes and no. Are there many bad actors in the crypto industry who would be refused service by a reasonable, rule-of-law-based banking system? Yes, absolutely. Is the banking system that the US currently such a system? No. The SEC spent two years pretending to come up with a system of rules for determining whether a cryptocurrency is a security or not, and they still can't - or rather won't - tell you whether Ethereum qualifies.
Think of a guy trying to buy a house in a redline district. He says "I met all their lending criteria, but the bank still denied my loan, and they won't even tell me why! I don't even know what I did wrong or what I have to do to get them to approve me!" Is he lying? Strictly, yes, he probably does know exactly why his loan was declined and what he would have to do to get approved. So his statement is disingenuous in that way. But my sympathies are still with him.
> Like all businesses, banks have the right to refuse to service customers they don’t want to serve because the costs exceed the income.
Not in general - the article already mentions how they are obliged to serve unprofitable zip codes. Again, this is the current state of the US system (partly the result of written law and partly of other things), not inevitable objective fact, not something that can't be changed, and not something that the banking industry has no input into.
I completely agree when it comes to personal accounts, but the restrictions required to avoid extending credit make such accounts impractical for any realistic business purpose. You can’t, for example, allow the customer to write checks.
I know this debate is about the US banking system, but I feel the need to point out that in most of the EU, cheques basically aren't used, and business purchases are generally made by wire transfers.
Without a chequebook or credit card, you could offer a bank account without any risk that the bank would ever have to pay out more than its nominal balance. Bank runs could still be a problem, but I feel an appropriate pricing structure could solve that.
Wire transfers can be reversed. It's rare, but when it rains it pours. Maybe this could be "solved" by holding all incoming funds for, say, 60 days but that would be extremely hard on most businesses.
Not familiar with the UK version, but these kinds of regulations usually apply to personal bank accounts and do not require extending any credit. So you'd only get a basic bank account that cannot be overdrawn, nothing more.
Not familiar with UK either, but in PL, you're mostly right, with the addition that you can also use this account for simple business, aka "one person company" for which you don't need to have a separate account.
The cost is here due to AML regulation. If government wants to outsource its duties (crime intercepting) to banks, then perhaps it should be government to pay for it (in the similar manner it pays telecoms for wiretapping).
I fully agree that the cost of the AML/CTF should be on the government.
However a bank still needs to work out if they will risk accept customers.
For example my CRO presented to me the cost of enhanced due diligence for Delaware companies. It was cost prohibitive so I argued that we should not bank customers who are too complex for the next 12 months.
See my explanation of why it is an extremely costly venture for banks.