Bank of America is reportedly targeting Coinbase by closing the accounts of parties that transacted with the US crypto exchange while facing the possibility of being the next victim of the US banking crisis.
Rumors of the embargo first surfaced after Stacks founder Muneeb Ali claimed the account he used for Bitcoin investments was reportedly shut down.
Could Bank be Targeting Coinbase?
Ali’s claim prompted Coinbase CEO Brian Armstrong to find out if more Coinbase users had had their accounts shut down. About one-tenth of the 8,500 Twitter poll respondents answered yes, while another 20% said no.
If true, the alleged account closures may be an extension of Operation Choke Point 2.0. This term was coined by crypto venture capitalist Nic Carter earlier this year.
The term references a deliberate effort by banks and their regulators to deprive legal but politically-polarizing industries like crypto of banking access. It gained popularity after the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation issued a joint statement warning that banks engaging with crypto would face greater scrutiny.
The US Securities and Exchange Commission’s (SEC) lawsuit against Coinbase makes things more interesting.
Last month the SEC said Coinbase ran an unregistered brokerage to trade unregistered securities that deprived investors of legal protection. Since the lawsuits, Coinbase’s share of the US crypto trading market has fallen 11%.
Denial of banking services could hurt the company’s American business further.
Will BofA Become Next Casualty of US Banking Crisis?
But Bank of America itself may be sitting on a ticking time bomb.
The Kobeissi Letter, a capital markets commentator, warned that BofA faces $100 billion in paper losses through its debt investments. The bank invested $670 billion of deposits it accepted during the pandemic into bonds with high prices and low yields.
If it had a massive run on the bank, it would potentially need to sell these instruments at huge losses.
Silicon Valley Bank, one of the banks involved in the second-largest US banking crisis in March, also faced a liquidity shortfall. Withdrawal demands forced it to sell securities at massive losses.
Tired of banks’ shenanigans and want to explore crypto? Read our comparison between crypto and banks here.
Additionally, Bank of America must pay $250 million in fines after it was found to have charged customers overdraft fees twice, refused to pay reward bonuses, and opened new customer accounts without their permission.
The investment bank must pay customers $100 million, the Comptroller of the Currency $60 million, and the Consumer Financial Protection Bureau $90 million.
The CFB recently turned its attention to the needless, sometimes exploitative charges banks burden customers with. JPMorgan, Wells Fargo, BofA, and others have been under the spotlight.
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