This time, the open door is the Chinese banks actively courting crypto companies. Changpeng Zhao (CZ), the CEO of Binance, has recently tweeted about the ongoing crypto crackdown by U.S. banks, stating that “when one door closes, other ones open.”
Regulators Seize Signature Bank
In recent weeks, U.S. regulators have filed multiple enforcement actions against crypto firms, causing suspicions of an attack on the industry. This matter became more evident following several banking collapses and seizures this month.
Regulators seized Signature Bank on March 12, claiming it could spread contagion. However, a board member, Barney Frank, stated that the bank was sufficiently liquid and that the action was taken to send “a powerful anti-crypto message.”
Operation Chokepoint 2.0: A Proxy Attack on Crypto
Notable figures have since come forward, echoing similar experiences at the hands of authorities. Caitlin Long, the founder of Custodia Bank, spoke of coordinated actions to deny her firm a Fed master account and Federal Reserve System membership. Meanwhile, Castle Island Ventures Partner Nic Carter described Operation Chokepoint 2.0 as “a well-coordinated effort to marginalize the industry and cut off its connectivity to the banking system.”
The operation is essentially a war on crypto played out by a proxy attack via the banking system. Combined with enforcement actions from the securities regulator, the U.S. crypto industry faces an uncertain future.
Despite the apparent attempt to stifle the U.S. crypto industry, Chinese banks are looking to fill the gap, marking a further nod to China’s reversal of anti-crypto sentiment. The Hong Kong branches of the Bank of Communications, Bank of China, and Shanghai Pudong Development Bank have begun offering banking services to cryptocurrency companies. There are also reports of active pursuit of crypto business, including bank sales representatives visiting cryptocurrency firms to pitch their services.
Mixed Experiences with Hong Kong & Chinese Banks
Sung Min Cho, the founder of Beoble, a decentralized message app, said that the change of tack by Chinese banks was unexpected and meant a lot to them. However, due to global compliance procedures, banks are generally guarded about accepting cryptocurrency businesses as customers. Some firms have reported experiencing flagged transactions and sudden account closures even after opening an account.
Although the Hong Kong banking industry provides varying experiences, Sean Lee, the co-founder and Executive Director of Odsy Network, stated that the industry is still in a solid position to capitalize on the aftermath of Operation Chokepoint 2.0. Lee pointed out that geopolitical uncertainty remains a stumbling block in attracting “non-Asian projects to bank with Chinese banks.”
In conclusion, as U.S. regulators tighten their grip on the crypto industry, Chinese banks are seizing the opportunity to welcome crypto firms. However, given the global compliance procedures, it remains to be seen how accepting Chinese banks will be towards cryptocurrency businesses.